Mortgage renewal advise.

[Athlon]

Hi all, it's time for us to think about our mortgage as the fixed term is nearly up.

I can re-fix at 5.5%, allow it to keep running and it will drop onto variable rate at 2.5% or change lenders I guess.

I like the idea of the variable rate as there will be no costs involved etc but what do you guys think is going to happen to the interest rates in the next couple of years? Will they stay around this rate or with the election coming will the rates start to rise?

tricky time so any advise would be great.

Thanks all.

[bogie]

no one has a chrystal ball, and they are many theories out there, but even the experts dont really know

so it comes down to risk and affordability - if your mortage payment went up by 20% a month, would you be losing your house, or just not having as many take aways that month? ..thats what you need to decide for yourself

personally, I let ours go back to SVR last year when the fix finished, and have been saving a few hundred a month, but left the payment the same (in fact, overpay even more)

..if interest rates stay similar, ive knocked 7 years off it

if they go up, im already paying more and can reduce the overpayment

if it really gos crazy or I lost my job, I can take a payment break, as im months in front


SO for us, it works out waayy better than to fix it

If the interest rates start creeping up, I will re-evaluate the situation of course

[Athlon]

Hmm, cheers, what you are doing is exactly the way I am thinking right now, a couple of points upwards won't hurt us and we only have 10 to run now anyway.

[bogwoppit]

I think the odds are rates will increase, it's just a case of when and by how much. Personally I would value a fix if it were over a long time period (and I knew I wasn't going to move). But if it's a 3 year fix, then a 3% premium would only be worth it if rates went up pretty sharpish (say, > 6% over that time).

Maybe take a look across the market and see how lenders are pricing their new variable rates. Lenders have to make the same predictions as consumers, and will price their products accordingly. Fixed rates will always be more expensive because of the predictability, but if on average fixes are a lot more, I guess that means the banks are expecting rates to shoot up. If there is only 1-2% or so difference, they probably are expecting a more modest increase. Obviously banks get it wrong (unfortunately for us all) but it's better than nothing.