Interest rates

[Lastnamefirst]

Looking at putting an offer in on a house, and would like a 5 year fixed deal for mortgage. How high do you think interest rates could be in 5 years time? Want to make sure we can afford the balance of the mortgage in 5 years time! Our mortgage broker reckons not higher than 2% (bank of England rate that is).

5 years is a long time - your jobs could have changes, could be in a world war with Russia… 5 years fixed is a good place to start then in 5 years you could always stretch over more years etc if rates did go up.

Honestly, nobody can answer that.

5 years ago a pandemic would’ve been a very remote possibility - no one sensible would’ve made financial decisions based on it.

In five years it's likely your income and expenditure will be very different. It's not possible to predict. Fix for five years and forget about.

5 year LIBOR swap rates are 1.6%, so that is what the market is pricing in. Then you would need to add your lender’s risk premium on top, which will depend on how much you are borrowing, amongst other things. But nobody really knows, even in the city. Nobody expected the credit crunch. Nobody expected the pandemic.

Not sure if all mortgage companies do it, but when we applied for ours they told us how much our monthly payments would go up if the interest rates went up (think they used 7% as the example) and discussed affordability and checked we'd be able to afford it :)