Remortgaging opportunity?

[HawkHybrid]

On 18/05/2021 at 22:58, KDave said:

There will be a base rate rise before year end. How this will effect mortgage rates, probably not much. Will these deals be around then, who knows, as said it's a guessing game on the details, house prices probably won't come down for a while. As I said last year, house prices will likely not move much in nominal terms when things get going, but in real terms they will fall a lot. 

I have sorted my 7 year fix with Barclays, can't see it going wrong at 1.49 percent. No more overpayments now, if I can't get a better than sub 1 percent return from savings that would have been used to overpay, then I'm doing it wrong and deserve to be poorer for it. 

 

personally I think you could have gone for the 10 year fix at 2%.

especially if you think rates will go up sooner rather than later.

if in 10 years time rates reached 6% and you can get 3% interest from savings.

what if I told you that you had the chance to borrow a significant sum at 2% and

keep that sum in the bank for a guaranteed 3%(pocketing the difference risk free) ?

 

HH

[KDave]

42 minutes ago, HawkHybrid said:

 

personally I think you could have gone for the 10 year fix at 2%.

especially if you think rates will go up sooner rather than later.

if in 10 years time rates reached 6% and you can get 3% interest from savings.

what if I told you that you had the chance to borrow a significant sum at 2% and

keep that sum in the bank for a guaranteed 3%(pocketing the difference risk free) ?

 

HH

Yes I agree perhaps 10 at 2% giving the additional 3 years may turn out to be a better bet, we will see. I borrowed up to the 40% equity on the 7 year fix at 1.49% to invest the difference, not huge amount of money but I think I should be able to make a decent return on that chunk of money over that time frame, say 6% compounding and should be able to clear the mortgage at the end from savings plus returns, mortgage free at 40. The 0.49% on the sum of money is quite a lot of interest saved and will be put to use compounding as well, but as you say if things don't go as planned the additional 3 years may have made a difference, we will see. 

[KDave]

1 hour ago, Roy said:

I think people should crunch the numbers and see what their monthly payments would be if interest rates hit 5/6% and they don't have a fixed rate mortgage.

 

I recall that only 1 in 50 mortgages is longer than 5 years with the majority of those being 2, but most people do fix their mortgage. I know people who have had tracker mortgages throughout this last decade and done very well from it.

The 2 year rotation that most do works when rates are falling or stable, saves a few quid per month on the better rates but offers no protection. These people need to change their behaviour ideally in the next 6-12 months, I reckon most won't and will keep opting for the 2 year fix to save pennies and find themselves in trouble later. Ideally people want 10 year mortgages at today's rates, given the inflation figures the system should help pay that mortgage off if pay rises keep pace, house prices don't fall in nominal terms, assets/investments rise with inflation, etc. They will need that fixed out going when food prices are rising 10% a year as well, fuel is up 50%, internet is up 7% a year, etc. Fixing a mortgage now is one less cost that can go up.

I was chatting with a colleague who is only 1 year into a 5 year fix and now is wanting to move to longer fix, they don't think 5 years is enough of a fix with the size of the mortgage but its a bit late now. I said have a look at it but talk to an advisor about it, although the ERC is quite high if the interest rate is quite a lot lower it may be worth paying to be better off in the long run and being able to sleep better at night.