Mortgages - fixed or track or variable?
Discussion
At that point of re-negotiating my mortgage. Seems to be a few fairly decent fixed deals around at the moment and wondered what the 'collective' think about the way things will go???. As I see it, rates are at an all-time low, so 'the only way is up', as the song goes. But, is it worth holding off for a while before paying a premium for a fixed rate?
Opinions?
Opinions?
If you're willing to take the risk of a tracker, and things don't change too much with interest rates, you'll get a cheaper deal this way. Arrangement fees are also usually cheaper than on fixed deals.
However, if you are uncomfortable with the risk of a tracker, go for a fixed rate every time. It'll probably cost you more money but the guarantee of a fixed monthly payment is what it's all about.
I wouldn't try to predict interest rate movements: the people who do that for a living can't even get it right! The decision you really need to make is whether you are comfortable with the possibility of rising/falling monthly payments.
I like to ride the economic wave of uncertainty so I go for tracker every time.
However, if you are uncomfortable with the risk of a tracker, go for a fixed rate every time. It'll probably cost you more money but the guarantee of a fixed monthly payment is what it's all about.
I wouldn't try to predict interest rate movements: the people who do that for a living can't even get it right! The decision you really need to make is whether you are comfortable with the possibility of rising/falling monthly payments.
I like to ride the economic wave of uncertainty so I go for tracker every time.
depends on a few factors.
How much LTV do you have , are you on repayment or interest only, do you want flexibility , peace or mind and how much can you afford.
if you are on interest only then perhaps consider switching to repayment whilst interest rates are low, this allows you to make a dent in what you owe so that when (it is a case of when not if) interest rates start going up you should have less capital to repay.
Or if you stay on interest only and choose a low rate tracker for now, are you in a position to be making overpayments - some lenders allow up to 10% per year without penalty. This would also allow you to clear a bit more capital and give you some flexability as the over payments are optional.
Or there are up to 5 year fixed rates available at circa 5.5-6% which would provide you with a large degree of stability but these rates are on average 2-3% higher than variables and short term (ie 2yr) fixes. With these you would be paying more in the short term but you need to consider will rates be higher than 6% in 5 years time? Also consider that if in 4 years time rates go up eg 3% fixed rate mortgages will go up by more than that as lots of people will want to swap from variable to fixed.
Personally, im on a variable rate tracker on repayment terms and im taking advantage of making overpayments at the moment.
dave
How much LTV do you have , are you on repayment or interest only, do you want flexibility , peace or mind and how much can you afford.
if you are on interest only then perhaps consider switching to repayment whilst interest rates are low, this allows you to make a dent in what you owe so that when (it is a case of when not if) interest rates start going up you should have less capital to repay.
Or if you stay on interest only and choose a low rate tracker for now, are you in a position to be making overpayments - some lenders allow up to 10% per year without penalty. This would also allow you to clear a bit more capital and give you some flexability as the over payments are optional.
Or there are up to 5 year fixed rates available at circa 5.5-6% which would provide you with a large degree of stability but these rates are on average 2-3% higher than variables and short term (ie 2yr) fixes. With these you would be paying more in the short term but you need to consider will rates be higher than 6% in 5 years time? Also consider that if in 4 years time rates go up eg 3% fixed rate mortgages will go up by more than that as lots of people will want to swap from variable to fixed.
Personally, im on a variable rate tracker on repayment terms and im taking advantage of making overpayments at the moment.
dave
My opinion is that it could pan out either way.
Getting a fixed rate now, may pay off when interest rates start going up. But you may still end up paying more on the fixed rate over that term.
It's a gamble, and nobody knows when, by how much, and how quickly the rates will rise.
If you are a family, and like/need to budget, then knowing your monthly payment for 2 years could be a valuable thing in itself, even if it costs a little more over the term.
But maybe you are in a position to take a gamble, and afford to lose. Can you afford your mortgage payments if the rate went up to 5-6-7% in the future?
Unfortunately I don't think anyone will know the correct answer to this until it's too late
Getting a fixed rate now, may pay off when interest rates start going up. But you may still end up paying more on the fixed rate over that term.
It's a gamble, and nobody knows when, by how much, and how quickly the rates will rise.
If you are a family, and like/need to budget, then knowing your monthly payment for 2 years could be a valuable thing in itself, even if it costs a little more over the term.
But maybe you are in a position to take a gamble, and afford to lose. Can you afford your mortgage payments if the rate went up to 5-6-7% in the future?
Unfortunately I don't think anyone will know the correct answer to this until it's too late
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