Interest rates?

[Jamesie]

What's the view on interest rates for the rest of the year? While the consensus today from "experts" seems to be that rates will stay low, they didn't really forecast the credit crunch did they? I'm taking anything I read from "experts" with a pinch of salt...

I'm coming up to the end of a fixed rate mortgage deal and if I go onto the Standard Variable I'll be better fairly better off per month. Moving on to another fixed would mean I was still better off by roughly half of that sum. However, all it would take would be a 1.5% increase in rates to make the fixed better value overall.

On that basis, and being of a relatively cautious nature, I'm inclined to move on to the fixed. Anyone got any thoughts?

[bighairyfaeleith]

What's the view on interest rates for the rest of the year? While the consensus today from "experts" seems to be that rates will stay low, they didn't really forecast the credit crunch did they? I'm taking anything I read from "experts" with a pinch of salt...

I'm coming up to the end of a fixed rate mortgage deal and if I go onto the Standard Variable I'll be better fairly better off per month. Moving on to another fixed would mean I was still better off by roughly half of that sum. However, all it would take would be a 1.5% increase in rates to make the fixed better value overall.

On that basis, and being of a relatively cautious nature, I'm inclined to move on to the fixed. Anyone got any thoughts?

I reckon rates will stay low until next year, but even then it will be no more than a 0.5% rise each time up to about 2% by late 2011

Just my opinion.

[Woody1985]

I work in an area that is impacted quite largely when rates change.

Earlier in the year it was not anticipated that rates would increase until around October of this year. However, with the change of government and the ever changing economic circumstance that may be sooner but once thing is almost certain is that they will rise.

[speedy_gonzales]

Jamesie, you obviously have to look at your own figures but I'm currently on Lloyds TSB SVR @ 2.5% (base + 2%). baserate would have to go up quite a bit for me to consider a fixed rate. Most products out there have an arrangement fee of around £995, the average fixed term is 2-3 years (market data), couple that with the sum of your loan which could be low, high or average.
I have what I think is a low(ish) mortgage and on paper, rates would have to rise well over 7% within 2-3 years for it to be even woth my while tying myself to a deal now. Perhaps ignorantly, I just can't see that happening as the 5 years leading up to this financial issue saw some very heavy lending to people that just couldn't afford repayments on 9+% The last thing the CONDEM's need is another crash in the housing market due to all the repo's.

[Andy74]

I work in an area that is impacted quite largely when rates change.

Earlier in the year it was not anticipated that rates would increase until around October of this year. However, with the change of government and the ever changing economic circumstance that may be sooner but once thing is almost certain is that they will rise.

I don't think we will see any rise for the rest of this year but we may get some rises next year.

I wouldn't be fixing anyhting just now, when they do get up the level you are talking the fix will be nearly over.

[LeithWalkHibby]

I don't think we will see any rise for the rest of this year but we may get some rises next year.

I wouldn't be fixing anyhting just now, when they do get up the level you are talking the fix will be nearly over.

I think rates may go up by the end of the year, but only slowly and in small increments. I'll be sticking with my 0.19% above base rate lifetime tracker for quite a while yet...:thumbsup:

[Hibs Class]

I wouldn't be fixing now , and if I moved to the SVR and was paying less interest each month I wouldn't be reducing my monthly payments either. That way the debt outstanding comes down a good bit quicker and will shorten the life of your mortgage.

[Jamesie]

I've decided to fix - as soon as the base rate hits 2% (which is only 3 x 0.5 percentage increaseas away) I'll be quids in. Call me Mr Cautious!

[LeithWalkHibby]

I've decided to fix - as soon as the base rate hits 2% (which is only 3 x 0.5 percentage increaseas away) I'll be quids in. Call me Mr Cautious!

How long is the fix for and at what rate? Interest rates may not hit 2% for a couple of years. Is there an argument for going onto the standard rate now and investing the difference so that at least you have a lump sum ready to pay into your mortgage later on?

[speedy_gonzales]

How long is the fix for and at what rate? Interest rates may not hit 2% for a couple of years. Is there an argument for going onto the standard rate now and investing the difference so that at least you have a lump sum ready to pay into your mortgage later on? Was going to post earlier but held back as financial 'advice' on messageboards isn't really the done thing.
However, as I tried to intimate earlier, work out how much the tie-in will cost you, that's monthly repayments plus arrangement for the duration of the deal, not the lifetime of the loan.
Then play with the figures that is SVR and what you think might happen in the near future with base rate.
Unless you are borrowing silly amounts where a small interest rise could cripple you, or are fixing low for a reasonable amount of time then fixing now when even the money men don't know what's happening seems a bit, erm, cautious? Off course if you are happy to fix now, knowing exactly what you can afford then fair do's.
Speaking from experience, I always fixed, got stung (IMO) recently though when rates crashed and I was tied at 6.33%, off course I try to console myself with the 'at least you know what you were paying gag' but as I was paying higher interest rates, my peers were making serious inroads into paying off their capital.
Either way it's a gamble but I reckon if I stay at SVR(2.5%) baserate would have to hit 7% over 3 years before I start to loose compared to fixing. This is taking in to consideration that any money I'm 'saving' is used to whittle away the original loan.

[The Mook]

How long is the fix for and at what rate? Interest rates may not hit 2% for a couple of years. Is there an argument for going onto the standard rate now and investing the difference so that at least you have a lump sum ready to pay into your mortgage later on?

This has come up in conversation a few times lately - assuming your on a tracker/SVR and your payments are low at the moment do you:

A) Overpay whatever you can afford, making inroads into the capital and paying off mortgage faster
B) Pay the lower rate and invest the balance in managed funds/shares/whatever, in a few years using the lump sum to pay off capital

Option A is less risky but Ive heard that with rates so low option B will make your money work harder for you.

Any opinions out there

[Woody1985]

This has come up in conversation a few times lately - assuming your on a tracker/SVR and your payments are low at the moment do you:

A) Overpay whatever you can afford, making inroads into the capital and paying off mortgage faster
B) Pay the lower rate and invest the balance in managed funds/shares/whatever, in a few years using the lump sum to pay off capital

Option A is less risky but Ive heard that with rates so low option B will make your money work harder for you.

Any opinions out there

Personally, I would say for average joe, pay off the mortgage balance. You'd be surprised how much £20 a month overpayment on a 100k mortgage on an average rate will take off your mortgage balance.

For the first couple of years you are barely touching the capital on the mortgage on a repayment mortgage.

If you have knowledge of S&S or are keen to learn then it may be worthwhile going for option B. There's no guarentee that the shares etc will rise though, although likely in the medium/longer term IMO.

You could perhaps do a bit of both.

By paying off the capital now you are protecting yourself to a certain extent from future interest rate rises i.e if they were to rocket over 5-10 years or so. There's no guarentee that the shares will give a greater return than a potential high rate.

It's all if's and buts, if I had a mortgage I would go for option a.

[The Mook]

Personally, I would say for average joe, pay off the mortgage balance. You'd be surprised how much £20 a month overpayment on a 100k mortgage on an average rate will take off your mortgage balance.

For the first couple of years you are barely touching the capital on the mortgage on a repayment mortgage.

If you have knowledge of S&S or are keen to learn then it may be worthwhile going for option B. There's no guarentee that the shares etc will rise though, although likely in the medium/longer term IMO.

You could perhaps do a bit of both.

By paying off the capital now you are protecting yourself to a certain extent from future interest rate rises i.e if they were to rocket over 5-10 years or so. There's no guarentee that the shares will give a greater return than a potential high rate.

It's all if's and buts, if I had a mortgage I would go for option a.

:agree: pretty much what I was thinking.

Must admit before someone mentioned it I wouldnt have thought of going down the investment route and as my knowledge of the stock market/investments amounts to having a small punt on banking shares Ill stick with the safer route.

As you say the overpayments can be significant. At the moment on my £600 monthly mortgage over £400 of that is paying off capital compared to just over a year ago when only about £170 was capital, the rest interest.