Interest rate going up...

[onelittletwolittle]

We bought a house last year, and borrowed £700,000 (London). We got a 5-year fixed at just shy of 1%. I now wish we'd fixed for longer, but we were worried about tying our own hands etc.

In 4 years, what sort of interest rate might we be looking at? We're going to try and overpay as much as we can in this time, but it's stressing me out! I have even read about people early-exiting their fixed term mortgage now and paying an exit fee in order to lock in a 3% 10-year mortgage. Should we be considering this??

Agree. And it can act as a contingency fund if the shit hits the fan with jobs or, for example, with soaring energy costs. When you overpay it's gone. Cash is ultimately king at times like this...

It genuinely worries me how chilled out a lot of my friends are about the economy right now, and interest rates. Anyone I know who works in finance, banking, tax, is worried, but others are not and I think it's naive not to have a reasonable level of concern. Many of my friends cannot remember a time of anything but low interest rates, and it's the people assuming we are at the high point who are going to get stung the worst

Can I just hijack this thread slightly and ask a question because I'm completely clueless lol. We have a really small mortgage (60k) but also a pretty rubbish interest rate (3.04%). My plan was to overpay 10% of the outstanding balance each year but would much rather have it in our accounts. As long as I find a savings account with at least 3.04% and put the overpayment amount in there each month would I be in the same position? Or is it much much more complicated than that?

@hilbil21 yes, it's pretty much that simple.

If you can get that return, go for it.

Thank you @teanbiscuitio.

And thank you @Liebig. I probably can't but I can look

I am unbelievably glad I fixed for 5 years, last year on 1.13%, wish I'd fixed for longer now, but fixing til 2026 still puts you in a better position than most will be in!

Wish I could have done the same for energy, obviously!

Oh yes, should've bought energy futures. If they exist.

Unrelated, but I'm always shocked at how cold (in summer) and warm (in winter) M&S is! This is partly why food prices are skyrocketing - they must be spending so much on heating and chilling. Like it's aggressively cold in the summer there. Ditto our local library in the winter - it's super hot. We used it a lot last winter just to stay warm for free during the day!

No it does not, OP pays 1% to the bank, why on earth would she pay back instead of putting her money on a saving which can easily beat that (2.5% already available, even ISA are closing to 2% with 20k x2 allowance for the household)

soon fixed rates will be more than the SVR. like how it used to be.

no more teaser rates

I remember a conversation I had many years ago with my parents. They said their mortgage payments went up and down over the years.
They got their mortgage in the 70s with nationwide and never moved.

When I did some digging it was really just a 2% lifetime tracker rate.

It seems fixed rate mortgages starting in the UK in 1989 (according to google).

OP, we borrowed same amount as you but at 1.29% fixed until May 2027 and I'm already worrying! Logical part of me says we will no longer have nursery fees from Sept 2025 (currently 1758 a month!) so will have that to chuck at mortgage and I am planning to go back full time from sept 2023, but I am still concerned.

We need to do A LOT to our house and have kept cash aside to do it (though we need to save some more to do it all) but questioning whether we should now or whether we should sit tight for a bit.

And I keep beating myself up for selling our last house. We sold for lots of reasons (more space, north facing, shared driveway) but had we stayed we would now be mortgage free (and we sold before the big jump with nowhere to go to so got hugely beasted on all fronts).

Just have to hope neither of us get laid off now (highly unlikely for DH, not likely for me but you never know) and we started making cut backs a while ago (not eating out as often/no takeaways/growing own food).

I know, my thoughts exactly! 😂

@gracedentssketty oh yes very similar situation. I'm also wondering whether to work full-time again in the near future, but would ideally like to wait until DD2 is in school (2024 - when the mortgage expires!). It's hard balancing family with finances, isn't it.

I promise I really was quite worried and this post wasn't a stealth boast or a troll post! I do feel better now having read everyone's responses, so thank you.

Depends on your tax bracket. If you have any tax free interest allowance, and haven't used it up, then yes. Otherwise the breakeven can be much higher.

@MrFirstTimeBuyer So would it be better for the savings account to be in my name only? I have no income I'm a SAHM. My husband is a high rate tax payer.

I've got a fix for 10 years at 2.49%.

The cheapest I can see now is 4%. That's with 60% equity 40% mortgage.

Yes, it likely would. You have 1,000 a year tax free allowance specifically for interest. He would have only 500 (and if he's an additional rate payer then he'd have 0).

That's assuming interest in joint account is apportioned 50/50 to each holder, which I expect is the case.

Thank you @MrFirstTimeBuyer. Will have a think

Sorry to jump in but where do you find accounts that pay a higher rate than interest rates. We have just fixed our mortgage for 1.6% but the highest interest rate from Lloyds who i bank with for a savibgs account is just over 1%.

@treespeas I've seen 3% plus but on a three year fixed.

Stay in your current deal. Rates are predicted to go back down in a couple of years so will be falling when your deal is up. Even if they don’t, you have a great deal.

its cheap stay on it....some youtube economists reckon rates need to hit 12 or 15% to hit the inflation etc....i remember my first house and i paid 14% and was advised to fix for 15 years at 17%...i didnt...they came down a few years later...inflation is a lot higher than what they say...a lot of food items have rocketed by over 30%...they just calulate it differently now to show less..!!