Mortgage advice

[Mercenary Keyboard Warrior]

Is a fixed even good? Aren't the rate rises priced in?

Yes within reason but its more complicated.
They may have contracted borrowings at say 1% so they add their margin and can offer that rate.
Where they use their own funds, or may need to raise capital later they will be more cautious and look for a higher rate

Reality is it all blends into one pot within reason.
They will look to maximise profits of course but you cant be an outlier by far in either direction or you will attract far to much interest in your lending, or none

 

[touch]

Is a fixed even good? Aren't the rate rises priced in?

What alternative do you mean? SVR? Pretty much any fix will be better than staying on SVR.

Or a tracker with a variable rate? I think most people would still call that a "fix" because it's usually referring to a fixed-term deal rather than a fixed-rate deal. Either way, a tracker possibly wouldn't be a good deal right now anyway.

 

[Mercenary Keyboard Warrior]

SVR is almost always a terrible thing to be on
About the only time you want to be is if you are imminently going to do something you couldnt do under most fixes fee free (like a massive payment or switching lenders etc)

 

[throwaway4372]

I mean tracker, not svr.

 

[HungryHippos]

I mean tracker, not svr.

Tracker you will eat all increases, fix is likely better due to consistency, especially when they could be bringing in several increases. It's one bill you can configure to be a set cost each month and probably should.

I've had trackers before, one even worked in my favour when the rates dropped to 0.15% last year or whenever it was, but this time I decided to fix for 5 years and that has been a good move.

 

[touch]

In that case, yes, the predicted rates are priced in already. If everything goes as the bank predicted then you'll end up paying the same whether you take a variable or fixed rate.

A variable rate has the potential to cost more if rates go up more than expected or to cost less if rates go down more than expected.
A fixed rate will cost the same regardless of how the rates change,

Whether than makes one good and one bad, I dont know? Guess it depends on your risk tolerance.

 

[413x]

I think it is reasonable to expect interest rates of 2% or more by the end of the year given inflation, and with that in mind the 'good' mortgage deals will probably start disappearing if they haven't already.

This seems to be what most are agreed on.
What is the unknown is how long rates will be that high. From when I was looking 10 year were cheaper than 5. Which suggests banks etc are pricing in this on for medium term. Its unusual for 10 to be cheaper than 5.

Apparently rates will peak in early 2023. I would probably agree. As I really don't think it will take much to start crippling the machine.

 

[Richie]

I think it is reasonable to expect interest rates of 2% or more by the end of the year given inflation, and with that in mind the 'good' mortgage deals will probably start disappearing if they haven't already.

In 6 months time, todays current deals will be the good ones but I get what you are meaning.

Unfortunately some people are locked into current deals and the ERCs can be make it too expensive to change for another few months.

 

[redstar1]

Is a fixed even good? Aren't the rate rises priced in?

Depends, if you want to know exactly what you are paying each month for 2,3,5,10 years then yes they are good. You can save money on variable but you run the risk of unexpected rises in interest rates. I've never not gone for a fixed rate, just for peace of mind.

 

[jonneymendoza]

I think it is reasonable to expect interest rates of 2% or more by the end of the year given inflation, and with that in mind the 'good' mortgage deals will probably start disappearing if they haven't already.

its already 3% now so you expect it to be 5% by end of the year!!!!
That would single handedly make a lot of people homeless along with increase in higher energy prices

 

[MR_Punk]

We were in exactly the same position. We ran the numbers and are just going through the re-mortgage process now.

 

[HungryHippos]

its already 3% now so you expect it to be 5% by end of the year!!!!
That would single handedly make a lot of people homeless along with increase in higher energy prices

Mortgage rates aren't always going to be base rate +2% on a fix, if the base rate is 3% the headline rate could be nearer 4%, but yeah it's pretty grim for people who are over-leveraged with large mortgages and low equity.

 

[Syla5]

Fixed rate deals now do not factor in future rate rises, they factor in the cost to the bank to borrow the money to lend to you. This is why they are slightly more then tracker products now but not vastly more. If they were already factoring in potential future rates for full period of fix, then all fixed rate deals on offer right now would be quite a bit higher.

 

[413x]

Fixed rate deals now do not factor in future rate rises, they factor in the cost to the bank to borrow the money to lend to you. This is why they are slightly more then tracker products now but not vastly more. If they were already factoring in potential future rates for full period of fix, then all fixed rate deals on offer right now would be quite a bit higher.

Interesting. I always thought they were calculated on some sort of future estimate

 

[CapitalOne]

Fixed rate deals now do not factor in future rate rises, they factor in the cost to the bank to borrow the money to lend to you. This is why they are slightly more then tracker products now but not vastly more. If they were already factoring in potential future rates for full period of fix, then all fixed rate deals on offer right now would be quite a bit higher.

Bingo

Interesting. I always thought they were calculated on some sort of future estimate

Take a look at Securitisation. For an extra thrill on why are are limits to overpayments and ERCs look up pool factors!

 

[Doobedoo]

Interesting. I always thought they were calculated on some sort of future estimate

Why? It doesn’t cost a bank anymore to lend as the money is paid at the time of the contract.