Anyone in the know have an opinion as to what interest rates are going to do?

[HeadFairy]

I realise they can only go up from here, but what's the thinking on how fast they'll go up? Is it worth fixing our mortgage rate for two years at 2.99% or will be get a horrific shock in a couple of years when interest rates are 5% and we have a massive hike in our mortgage payments?

What's the alternative to the fixed rate of 2.99%?

From what I read in my financial supplements there is a race to fix at the moment.

Because of the increase in money supply there is a theoretical risk of inflationand hence a rise in interest rates to control it. Given the current deflationary background a sharp rise seems unlikely but lets face it, the economy is kind of operating outside the rulebook at the moment.

Daisy - the 4 and 5 year fixed rates are nearer 4-5%

Wasabi (waves) - you're right of course, it's so hard to predict because what we're seeing is so unprecidented. We can't even compare to 1929 as the whole financial market/mortgage market was totally different then.

It is outside the rule book.

However, the relationship between the BOE base rate and the mortgage deals is different to previously. Even if rates are a little higher in two years it doesn't mean that the mortgages deals will change exactly in line.

18 months ago you could get tracker deals that were BOE rate +.5 - now it's more like +3. If rates go up (a bit) then this is likely to be corrected (a bit)

2.99% for two years sounds pretty good to me. What's the point in paying 5% now just in case it goes up to 5% in two years?

That's what I think brettgirl (the last bit of your post that is). DH is assuming that we'll face a big hike in our payments in 2 years time but we have no idea what'll happen then. The market may have recovered sufficiently so that the mortgage market is more competitive. So why pay more in the long term to avoid a situation that may not arise? I can't seem to persuade dh.. but I felt I didn't know enough about what interest rates might to do to counter his argument.

Well suggest to him that he puts the difference into a savings account. Then if it goes up he will have some money to help out and if it doesn't you can just knock it off the mortgage (and be better off). It will mean that you are also used to higher repayments without donating it to the bank.

FWIW I have a degree in economics [sad woman emotion] I think they will go up a bit, but some of the scare mongering on here in relation to the previous recession is way off the mark IMO. However, it is truly imposssible to say because we don't know what's around the corner!

That's such a good idea brettgirl.... I will definitely suggest that. I might actually suggest an Isa or something we can't touch for two years to make it more realistic. Thanks for that