Fixed Rates On Their Way Up!

It appears that Fixed rates could well have bottomed out and may now start going up again.  Market rates which control fixed rate pricing have increased last week from 2.96% to 3.15%.  This means that it is likely that fixed rates will start going up again over the next week or two.

The increase in market rates is due to a rise in inflation and the government’s failed gilt auction which has left market confidence shaken in these uncertain times.

There are over a million homeowners currently on the standard variable many of whom are waiting for interest rates to drop to their lowest.  For fixed rates that could be now.  The Bank of England has signaled that it is reluctant to lower rates further than 0.5%.  All of these factors point to a bottoming out in rates.

A lot of financial experts are hinting that fixing for 5 years could be a very good idea to ride out the storm.

If you are on the standard variable rate and are thinking about moving to a fixed rate mortgage now would be a good time to start looking.  Speak to your adviser or alternatively (if your adviser hasn’t spotted this change in the markets and contacted you accordingly) if you would like a quote from us call us on 0870 080 2343 or complete the mortgage enquiry form.  We are FEE FREE mortgage brokers offering whole of market advice.

 

Fixed Rate Or Tracker Rate?

Many people who are thinking about remortgaging or buying now have to decide between fixed rates or tracker rates.  Variable rates don’t seem to be offered by most lenders anymore.

Fixed rates have been coming down over the last year and it is now possible to get a 5 year fixed rate at 3.99%.  Some experts in the industry suggest that fixed rates have bottomed out now and that they could possibly start going back up again soon.

Tracker rates have gone up drastically over the last two years.  It used to be the case that you could have a Bank of England base rate tracker discount.  That is to say, you followed the Bank of England minus a percentage!  Sadly those days are now gone and best tracker rates you can now obtain are Bank of England plus 2.29% giving a current pay rate of 2.79%.

So the question remains.  Which rate would you choose, tracer or fixed?  The answer to this question simply comes down to your own personal risk profile.  A fixed rate will give you the security of an established budget regardless of what happens to the Bank of England base rate over the next few years.  A tracker  means that as soon as the Bank of England rate starts to go up again, so too do your mortgage payments.  The problem is that no one knows when the Bank of England will go up and by how much.

 

 

Should I Switch My Fixed Rate Mortgage Now?

A few years ago it was rare to find a fixed rate worth switching to even if it meant paying redemption penalties on your original rate.  Times have changed recently and fixed rates have dropped very quickly indeed.  18 months ago a five year fixed rate of 6% was quite a good rate.  Now, however a five year fixed rate can be as low as 4.44%.

The question remains then.  Is it worth paying redemption penalties with your existing lender and remortgaging to a new lender?  In some circumstances, yes, it is.

Here’s an example of a recent remortgage that we arranged.  The client had a 5 year fixed rate at 6.19% with 44 months to go until end of redemption penalty.  The redemption penalty was £2600.  The new rate we found was 4.69% which represented a £112 per month saving.  Even when taking into account paying the redemption penalty  and the new mortgage arrangment fee, the saving over the 44 months  was £1329 which equates to £30 per month.  £30 per month is better off in your pocket than a lender’s so it is definitely worth remortgaging and paying that redemption penalty.  Of course, this depends entirely on your circumstances but it is worth you having a look to see if you can save money during this recession.  If you would like further advice please use the enquiry form or call us on 0870 080 2343.

What To Do If Your Mortgage Payments Are Lower

Many UK Homeowners will have found their mortgage payments have halved in the last few months due to Bank of England base rate reductions.  This is obviously good news for mortgage holder (but bad news for savers) so what should they do now?

There are two options to consider here.  The first is overpayments.  These circumstances are not normal so don’t get used to the current mortgage payment.  The payments you were making a year ago were normal so if you can, you should try to overpay now up to the equivalent of your mortgage payment last year. The second option is more about helping the economy.  We’re in recession at the moment and the best way to get out of a recession is to spend money which keeps the general economy going.  You could use you excess monies to fund home improvements.  Now is not a great time to sell so it might be a better time to improve not only for your home’s future investment value but also for your immediate quality of life.

In a recession everyone is worried and has good reason to be, but try and thing long term as well as short term.  You need to keep on paying your bills now  and savings are a good idea.  The one aspect about the current set of circumstances which is worrying is that people might get used to the current interest rates and think that  they are normal.  They are not normal and one day soon interest rates will go up again and so too will your mortgage payments.  Try and budget for  this now rather than later.