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Interest rates

ricky77ricky77 Posts: 1,510
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in Advice #1
Hi

I see interest rates are going to rise

http://www.telegraph.co.uk/finance/economics/8220862/Homeowners-should-prepare-for-interest-rates-of-5pc-warns-Bank-of-England-markets-chief-Paul-Fisher.html

We have a house with a two year fixed rate of about 3.8%. It is due to expire in a year....should we look at getting a fixed 5 year on a relatively low rate now before the rates go up?

It's really worrying me!

Comments

  • PorcupinePorcupine Posts: 25,246
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    #2
    It worries me as well, but i have heard differing reports. Somewhere else i heard it could be another 11 months before the rates rise.

    I am on a tracker mortgage and have been for a year now. I am worried it will go up sharply.
  • JeffG1JeffG1 Posts: 15,269
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    #3
    Good news for savers, though. Mortgage holders have had it too easy for too long.
  • [Deleted User][Deleted User] Posts: 1,229
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    #4
    JeffG1 wrote: »
    Good news for savers, though. Mortgage holders have had it too easy for too long.

    Ahem. Been on a fixed rate of 6.5% for the past 3 years, got another 2 to go. Not all of us have had it easy, thank you.
  • JeffG1JeffG1 Posts: 15,269
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    #5
    Sorry you missed out on the low rates, then. Wish I could have had a fixed rate on my savings :p

    Did you know that savers outnumber borrowers by six to one?
  • purplelinuspurplelinus Posts: 1,515
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    #6
    Just wish I could afford a mortgage!
  • this_is_methis_is_me Posts: 1,304
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    #7
    JeffG1 wrote: »
    Did you know that savers outnumber borrowers by six to one?

    Depends on how you count them. My wife and I have 4 savings accounts and 1 mortgage account between us. So even just between the two of us, savers outnumber mortgage borrowers by 4 to 1.
  • Keefy-boyKeefy-boy Posts: 13,613
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    #8
    ricky77 wrote: »
    We have a house with a two year fixed rate of about 3.8%. It is due to expire in a year....should we look at getting a fixed 5 year on a relatively low rate now before the rates go up?

    It's really worrying me!
    But surely there will be penalties if you terminate your current mortgage early? As well as penalties you need to factor in the costs of re-mortgaging. Stay put, stop worrying and look for a deal at the end of the current one. Interest rates may go up but the'yre not going to take off like a rocket next year it would be too damaging to the recovering enonomy.
  • rjb101rjb101 Posts: 2,689
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    #9
    Keefy-boy wrote: »
    But surely there will be penalties if you terminate your current mortgage early? As well as penalties you need to factor in the costs of re-mortgaging. Stay put, stop worrying and look for a deal at the end of the current one. Interest rates may go up but the'yre not going to take off like a rocket next year it would be too damaging to the recovering enonomy.

    I would agree, but from the same paper....

    http://blogs.telegraph.co.uk/finance/ianmcowie/100009125/homebuyers-should-lock-into-fixed-mortgages-before-rates-rise/
  • Keefy-boyKeefy-boy Posts: 13,613
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    #10
    rjb101 wrote: »
    I would agree, but from the same paper....

    http://blogs.telegraph.co.uk/finance/ianmcowie/100009125/homebuyers-should-lock-into-fixed-mortgages-before-rates-rise/
    Clearly it is beneficial to get a fixed rate deal sooner rather than later but that article does recommend it for those currently on variable rates. I'd very much doubt it would be likely to recoup the costs of terminating an exisiting fixed-rate deal early. The article does say that some lenders will hold deals 6 months away from requirement, that may be the answer for the OP?

    My first mortgage was at 12.5% and that was good at the time!
  • c4rvc4rv Posts: 29,596
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    #11
    sahalouise wrote: »
    Ahem. Been on a fixed rate of 6.5% for the past 3 years, got another 2 to go. Not all of us have had it easy, thank you.

    and you gambled when you took out 5 year fixed that it would not be going down.
  • John259John259 Posts: 28,447
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    #12
    JeffG1 wrote: »
    Wish I could have had a fixed rate on my savings
    Provided you're prepared to tie up the money for a while you could, and still can. Most banks and building societies offer fixed term savings products, generally with much higher interest rates than instant access savings accounts.
  • [Deleted User][Deleted User] Posts: 10,488
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    #13
    sahalouise wrote: »
    Ahem. Been on a fixed rate of 6.5% for the past 3 years, got another 2 to go. Not all of us have had it easy, thank you.

    Oh I don't know. I remember our mortgage went up to about 16% or so in the '80's. Bank rate was around 14% at the time.
  • rjb101rjb101 Posts: 2,689
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    #14
    sahalouise wrote: »
    Ahem. Been on a fixed rate of 6.5% for the past 3 years, got another 2 to go. Not all of us have had it easy, thank you.

    Should you not have changed it? I know there are penalty charges but would they have been more than the interest payments? Most of the money sites have a calculator on them to see if it's worth it, It may still be worth it now.
  • DaisyBumblerootDaisyBumbleroot Posts: 24,763
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    #15
    If the Bank of England interest rises to 5% what would the average SVR be on a mortgage?

    Because we came out of our 5 year fixed rate of about 5.69% earlier this year and the SVR we are now paying is 4.79% and the BOE interest is 0.5%. So if the BOE went up to 5% would that mean the SVR would be about 9.79%?
  • ParkerParker Posts: 998
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    #16
    The SVR for most lenders didn't really drop very much, certainly no where near with anything like the drops of the BOE rate. This is the SVR history for one lender:

    September 2005 - 6.35%
    September 2006 - 6.60%
    December 2006 - 6.85%
    February 2007 - 7.10%
    June 2007 - 7.35%
    October 2007 - 7.60%
    January 2008 - 7.35%
    March 2008 - 7.10%
    May 2008 - 6.85%
    December 2008 - 5.85%
    January 2009 - 5.35%
    February 2009 - 4.99%
    April 2009 - 4.74%
    March 2010 - 5.19%

    As you can see even with the BOE rates changing over time the SVR isn't really that different. Even when the base rate was 5% a few years ago the SVR wasn't much higher. Although nothing to say the banks wouldn't take the opportunity to up their SVR to something like 9%! I believe for banks the Libor rate is more important, but not something I know a huge amount about! Base rate is obviously very important for those people on tracker mortgages as at the moment the only way is up!
    Because we came out of our 5 year fixed rate of about 5.69% earlier this year and the SVR we are now paying is 4.79% and the BOE interest is 0.5%. So if the BOE went up to 5% would that mean the SVR would be about 9.79%?

    How come you didn't look around for another deal at the time? Earlier this year (May) I moved in to an interest rate of 2.69% so there are decent enough deals out there. You could have been spending £100+ extra each month compared to a different mortgage.
  • Judge MentalJudge Mental Posts: 18,593
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    #17
    I'd wait until your current one expires and then have a good look at what the experts are saying about interest rates at that point.

    I'm currently paying 0.9% having been lucky enough to have opted for a tracker with no floor.
  • howardlhowardl Posts: 5,120
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    #18
    Our deal runs out end of the year at a 0.75%
    We have got a new deal of 2.75% fixed for two years with £250 cash back .
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