Mortgage rates and change in gov i.e Labour gov possible incoming

[MortgageRateSwitch]

Hello there,

I was last year given some good advice here on mortgages which I still refer to as ot remains valid- so thank you.

Now, I will really appreciate comments, opinions, warnings, optimism etc etc
on what ''mortgage heads or house price heads' on MN think would happen to mortgage rates should a labour gov get in. I have never lived here with a Conservative to Labour Switch; just the other way round, which usually increases confidence in money markets and the UK economy. Do you think a labour gov takeover will really result in the opposite even if inflation rate continues to fall?

Anyway, let's discuss, speculate away. Thank you. No doubt I will again pick up something useful from this thread.

In theory labour will work hard to encourage large amounts of affordable housing to be built. That will help reduce the prices of homes across the board. But in reality I don't think they can actually afford to do much.
With regard to interest rates - my feeling is that everything is so globally interlinked these days that any government of a relatively small country, such as ours, does not have much control of interest rates. We have to follow the fed pretty much.

The problem is that inflation is highly dependent on energy prices because the production of everything requires energy. Therefore what happens in the Suez is probably more important than who the next uk government is in terms of interest rate policy.

What lower investor confidence could do is weaken the pound ( because demand for sterling falls if fewer people want to invest in sterling denominated assets), which then increases energy costs as they are typically dollar denominated - higher inflation- higher interest rates. But a Labour government may not weaken investor confidence. There will probably be a blip after the election because of the uncertainty so it all depends on the first budget etc.

@DrySherry Thank you. Sounds reasonable on all counts.

Which reminds me what my DH randomly said yesterday: That 'with all things going on in the world and possible outbreaks of wars (by any, of the current agitators) around this time next year, everything will be badly affected.'

I am really holding tight on my negotiated mortgage rate switch on 75% LTV of 5.15% , 10 year fix, which I can afford, just or okaish, but don't want anymore speculations with my product- I have till 1st May to make final decision. Also, rent increase on another property (low mortgage) in coming years can help add to the income to pay towards the 5.15%. My mortgage is huge and worried if I go for 4,77% currently on offer for 2 years, everything will change for the worse in 2 years- which I don't want to face. Not finding 5,04% fix on 5 years attractive.

So war breaking out in next 2-5 years or destabilisation of inflation fall and teh economy generally (house prices so drop in LTV), would really tip me to the edge, than 5.15% fix now and watch others enjoy lower rates as interest rate cuts start to kick in in 2 years (some war heads speculate on a war with Russia in 10 years lol).

I can go on tracker at 5,61% which I can fix at any time with no penalty, but 5.61% 'to speculate for 2 years, is just too much for me.) So, watching this tracker one daily- if it falls a bit, I will be in, without a doubt.

Or am I mad to hold on to 5.15% for 10 years? Maybe go for 5.04% 5 year fix?

Decisions. Decisions.

That's 5.15% for 10 years.

@LaPalmaLlama This is good too. Thanks.

I am trying to keep an open mind on everything and watch everything, but I am not a natural finance/economy person (just good with my money), so I might, on my own, heavily put too much reliance on only one factor, which would be dangerous. Hence I am inviting all this input so I keep my feet on teh ground and not run away with 'sound bites' both good and bad.

Won't ask DH as he is fine with 5.15%, as unfortunately, he is in business and tends towards thinking of cash flow and taking 'lowest' payments of most things first- he does have standards on certain things and won't budge- like his Bentley car or how he flies lol. I think differently on investments - yes, it is my property- he has his, mortgage free.

Really good to be reminded I shouldn't worry too much about a change in gov. Now I can focus much more on world events and what teh fed is doing, Thank you.

I am surrounded by Tories- I don't vote here as vote elsewhere and really not into politics- and they are so negative about teh labour gov. some get depressed just at the thought of it. They don't even have mortgages or financial worries.

What are the ERC’s on 10 years? It’s a long time to commit to a house for - can you port it?

I'm not sure I would personally fix that long at that rate, general consensus seems to be that rates will fall in the longer term and it's a long time to be a higher rate unnecessarily.
Personally I would look to fix for 2 years now, however it depends on the size of you mortgage, the headroom you have in earnings and your comfort level / attitude to risk. There's much to be said at having a guaranteed amount you will pay every month with no downside risk.

As for Labour, I think rates would have short up had Corbyn got in but Starmer's lot seem to be very focused on everything being costed (even if it is all through non-dom taxation). The markets don't like unfunded tax cuts / promises unless it's infrastructure related or one-off, and that was exactly Liz Truss' problem. I would also guess at a Labour government already being costed in at the moment given the polls hinting that way. The bigger market shock in a way would probably be the Tories holding onto power... All my own views of course!

Yes that's important. We got a great rate for 10 years but we can port it to another house giving us some flexibility

Hard to predict who will be in government in ten years or what global events will be affecting lending. I agree with pp who said fix for 2 years and see where you’re at.

Isn't there a compromise, like 5 years? Also redemption penalties. What if you had to move as PP said or release cash? Also you will have a higher ltv (hopefully) when you renegotiate, so might get better rates or terms too.

I'd look at downgrading the Bentley myself and concentrate on reducing debt if I was that worried about the global climate.

It's my last property I bought 5 years ago. No plan to buy another. I just need to keep it. Yes, I can port.

ERC is huge- so can't come out if I fix at ANY rate. In the event a huge debt I am waiting on comes in- if ever, so not counting on it at all, but on an 'if' chance- I can pay 10% a year without a penalty.

Between 5 year and 10 year fix, I will save something like 120 per month, and I just don't want a risk of it going up in 5 years. I cannot bank on LTV falling to 60% although it is currently 69% and going down as it is repayment. Mid year last year LTV was 64% .

Ok, I will sleep on teh 5 year fix.

When I bought, I so wanted a 10 year fix but the then additional £400 a month was just too much and unaffordable. Now, the additional sum on 10 yr is also a lot, but affordable to me. See where I am at? I just don't want to take on risks in 5 years etc in case things get worse.

Our core finances are separate- my choice. So Bentley etc don't matter. Although I declined a Christmas break ( I don't need it) so I know there is some cash I can touch if desperate AFTER 5 years. Sadly, he does need a break and doesn't like travelling without me- I can travel on my own if there is a need- aging relatives etc.

Higher LTV- is also why I did't do a 10 year fix when I bought- I put in 15% deposit. However, once you hit 60 LTV, not much reduction in rate % which I was disappointed with. Yes, my repayment will be stuck in there, but have other assets I can sell in an emergency, although since this property is a leasehold (and other sharers of the freehold are constantly arguing with each others), I now feel like it will be IT I will get rid off if I need to get rid of anything. But, I have found a way to ignore their silliness- they are just unhappy people and stressed, so hopefully, I will sell something else.

Yes, for a global person, I am worried about the global climate. Luckily I was aware of the risks and chose what was best for me then. Also covid impacted my situation- but I will focus on the future!

As I said, I will now sleep on the 5 year fix- thanks to you good people on this thread. I have till end of April to decide.

The other side of the risk however is that you fix for 10 years but in 5 years the rates are much lower and you could have saved £xx per month.
From what you're saying though, you sound like you don't mind that and would prefer to have a fixed stable amount which is definitely a valid consideration.
Like I said I fixed for 10 years too so I completely get where you are coming from.

ok- I will hold my nerve and fix for 2 years. I will then save the 200 or so, I will save from the 10 year fix.

It's why I started the thread, as my lender allows me to negotiate a rate with 6 months to go- so it is 18 months from May 2024. {As opposed to 5.61% to speculate on a tracker for 2 years- so possibly, same result then, if not better on 2 year fix, which I can afford comfortably.]

Thank you.

I save all my income as not spendthrift- so, I will continue saving and benefit of a 2 year fix.

THANK YOU VERY MUCH ALL.

I didn't want DH to say 2 year fix just because it is cheaper. Your reasonings are sound- I like and need reasons. Thanks.

And yes, DH wouldn't want to hear about my mortgage rates for much much longer, hence I also wanted 10 years (and for myself too).

@scrunchmum = thank you re the wanting of 10 year. I have no mortgage on a small house- not worth much, just practical and don't want to sell it anyway- and it is the best feeling.

@scrunchmum re risk of rates going down- yes, what happened to me during recession- but just buckled up and ignored those on low rates. I had free holidays anyway thanks to just visiting family in warmer climates, so I just tried not to compare but committed to keeping my smaller flat which I still have today. I hold rather than speculate too much- all these were bought as homes for me but life just changed for the better and it was either expensive to sell etc etc so Kept them. I fell into all this because I don't speculate. I focus on affordability.

Small update:

I will go for the 2 year fix at 4.77%. DH has committed to easing any pressures on my tax liability this year (was already agreed 2 years ago; and it is very small), next year (required) and year after- so I will be saving everything.

I don't need money help, but just a 'commitment' I can dip into somewhere if things hit badly for/ after the next 3 years. The difference between 10 year and 2 year rate will be saved for 2 years which will I will use to weather an additional year of extreme pressures- so that makes it a four year plan.

He also agreed not much difference between the 2 year and 5 year fix, especially if the 5 year fix is compared to the 10 year fix.

I reduced my income hugely to support DH and his business as that will workout better for me long term, at this stage of my life. But I can get a professional job within 6 months - I can locum_ if I really really need to, although DH will lose the business help I give. I have done the large chunk for the business help he needed, to be honest, so I CAN take on a professional role- just teh travel will kill me as moved out of London and it will disrupt our life massively, something I don't think DH can appreciate unless he has been through it, which he hasn't. But, needs must. I won't lose my property over that- it is non-negotiable.

So, thank you all. I didn't come here to change my mind- just to be given good pointers on what to focus on as I mortgage rate drop watch etc- so, this is an added bonus. I will cast away the need for certainty (from the 10 year fix) and embrace uncertainty which I can do, but it does get tiring as I wasn't supposed to be here with this mortgage at all, but life happens which is probably why I am shy to take on any more uncertainty- I am usually not risk averse, but then my mortgage is HUGE, to be fair. So need to 'proof it' every which way, I can.

Thank you to you all and good evening.