Whats the feeling on the current interest rate rises and how long will they stay up ?

C

CmTaz

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I am caught in 2 minds here. Usually when I see threads of shall I fix or shall I go variable etc I tend to think would you ever make up your own mind etc ;)

That said I have fallen into this trap myself. I have just come off a discounted variable rate and have the option letter in front of me to select the new rate - tracker, standard variable and a host of fixed rates.

The reason I am caught in 2 minds is that the letter was sent just as the last rates rise was being put through so I am left with the choice of ..
  • Tracker 4.6% ( which as soon as I sign it will go to 4.85% )
  • Standard variable 4.85 % ( again straight to 5.1% as it has gone up since. )
  • 1 year fixed 4.99%
  • Options from 2 to 10 years fixed @ 5.1% to 5.15%
So realistically I am looking at min 4.85% rate which if the guys in Brussels knock another .25% on takes me to the fixed rate percentage I have on offer in front of me.

I know there is no crystal balls out there and not looking to promote idle speculation but is the general consensus that these rates are going to climb a bit more and then stay at these rates for a few years ??

I only bought my first house 6 years ago so I have been used to the lower rates of circa 3% but I gather this was as I described it a low rate considering 20 years ago levels were well into double figures. I also see the states and the uk at levels still above what the ecb is on now.

So all in all I am surprisingly tempted to grab a fixed rate option. Any thoughts on this would be gratefully accepted.
 
I would certainly fix for a year or two (no longer) based on the rates you outlined. It's likely there will be another increase in June and no more are predicted yet but I think don't think too man people would be too surprised if there was another quarter after this.
 
Re: Whats the feeling on the current interest rate rises and how long will they stay

Over the lifetime of a mortgage, you're more likely to save money by opting for a variable rate (tracker rate, these days). This is because the markets price the expected future rates into the fixed rate and - on balance - you pay a premium for this. That's not to say you might not be lucky with the time at which you choose to fix, and end up "making" money on it... but actuarially, you're more likely not to.

So the decision really comes down to two major questions:
(1) Do you need certainty in your payments? - if you're close to your limit of affordability, you may be better fixing just for peace of mind. If you're not, and don't really need the certainty, we come down to question -
(2) Do you feel lucky?
(I'll omit the "punk" lest it contravene the posting guidelines :D)

That's really all there is - either you need the certainty, or you're prepared to bet on the rate. Bear in mind another rate increase is thought to be likely in June, and nobody's terribly sure about the rest of the year.
 
Re: Whats the feeling on the current interest rate rises and how long will they stay

My personal opinion is that,whatever about further rises it will be a long long time before rates ever go that low again as the low rates have caused asset bubbles all over the shop and we have yet to see the damage of these unwinding.
 
Over the long term, the interest rate that the ECB would like to have is about 4% which would suit them if Inflation stayed at 2%, economoic growth in the major euro economies was steady and money supply growth was low. However for the immediate future (next 12 to 18 months) the rates could go up to between 4.5% to 5%.

My advice, is to take the short term fixed.
 
It really depends on your personal circumstances.
If you need the certainty of a fixed mortgage payment then it's a good way to go. If this is not the case then I would stick with a tracker rate.
 
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