Interest rates

[El Pollo Diablo]

Update on our current situation:

- Santander are c.nts.
- the reason why is complicated and annoying and I really can't be arsed to explain, but Santander are c.nts.


We now have to reapply for a mortgage. There's barely any difference between the rates today and the rates yesterday, because the banks were expecting it and had already priced it in. Rate increases from lenders as a distribution are generally slow and steady rather than jumpy. So we can manage. Not ideal, but we can.

The rates are, though, in general, sh.t. We don't really want to be locked into a sh.t rate for five years. So what's the likelihood that rates will be better or at least back to the present day in two years' time?

[Woodchopper]

So what's the likelihood that rates will be better or at least back to the present day in two years' time?

No way any of us can answer that with anything beyond a guess.

[El Pollo Diablo]

A guess is fine - I'd rather have a group of guesses than just my own

[dyqik]

A guess is fine - I'd rather have a group of guesses than just my own

The BoE was predicting inflation to hit 13% by the end of the year, and interest rates would likely follow upwards as well - meaning that today's rates may not be that sh.t. The question then is how fast they will come down again. My gut feeling is that it might take more than two years, particularly if the Ukraine and CoVID supply chain situations drag on, along with Brexit kicking in.

Five years is a better bet. Even if the fixed rate isn't great, inflation will probably result in pay rises in that time as well, which reduces the effective rate.

The current five year fixed rates I can find online are lower than my 30 year fixed rate mortgage. But I know exactly how much my mortgage will cost me.

[Trinucleus]

Giving a longer perspective over a few decades, these rates are very low. They used to be 5 -8% range, which meant mortgage rates were considerably higher (but conversely, you actually got a decent return on savings).

No, I don't know which way things will go from here on, but the higher rates seemed to be a knock on from a big jump in oil prices in the 70s.

[Sciolus]

So what's the likelihood that rates will be better or at least back to the present day in two years' time?

No way any of us can answer that with anything beyond a guess.

Nor can the banks, but they are considerably better informed than a bunch of random people on the internet, and have a strong financial incentive to get it right.

Don't go for a fixed rate because you think it will save you money. Go for it if you value the certainty. It's the same as insurance. You will probably pay more (because you are transferring the risk), but if things go tits up, it might save you a lot.

[lpm]

A guess is fine - I'd rather have a group of guesses than just my own

How about a don't know? Will you take a don't know?

[Millennie Al]

My personal guess is that interest rates and inflation are going up and staying up for quite a while. Things are looking bad for the UK as there is no conservative party after the one that calls itself Conservative totally deserted conservatism and introduced the radical change of Brexit, while also adopting economically harmful policies such as opposing immigration. Of the two candidates for leader, one seems to have no idea what she stands for, but is clearly completely deluded to be suggesting huge cuts in civil service wages etc, while the other is vaguely competent but still somewhat dodgy (and currently looks like unlikely to win).

However, very long fixed rates are bad. Suppose you borrow £200,000 at 5% for 25 years. Your monthly payment would be £1,169.18. After twn years you would owe £147,848.95. If we have inflation of 5% also, then after 10 years you would expect to earn 63% more than currently, so could afford to pay £1,904.47 and if you do so you'll end up paying off the mortgage early (after only about another 8 years insteaqd of 15) which will save a considerable amount (about £25,000). However, if you have a truly fixed rate for 25 years (which I don't think is available in the UK) you might not be able to increase the payments (or, which is effectively the same thing, increased payments attract an overpayment charge to compensate for the lost interest).

[Bird on a Fire]

Personally I don't see any short-term resolution to the UK's woes. Two more years of Tories, and mad ones at that. These are global issues (Portugal is struggling to find skilled workers in several sectors, and we have 6% unemployment - the lowest since the crash - but crap wages) but the UK has managed to spin a web of uniquely embuggering circumstances from it's dirty protest against its own position in the modern world

Whatever Labour decide to do, if they get in, will take a while, and I'm not convinced they're going to try anything very much.

Can't be good news for house prices either.

I very much value simplicity, certainty and security, and if I were in your boots I'd really want protection from future shocks which will be looking dicey for quite a while. If some big financial fuckeroo happens my ability to pay might also be dicey, at the worst possible time, and I like living indoors.

But then I have no experience managing money and don't know what I'm talking about. Looking forward to learning.

[basementer]

A guess is fine - I'd rather have a group of guesses than just my own

How about a don't know? Will you take a don't know?

I don't know either, particularly as I'm in another country. Do you think there's merit in looking at 2-3 year swap rates to get an idea of whether there's a consensus as to which way rates will be heading?

[TopBadger]

Giving a longer perspective over a few decades, these rates are very low. They used to be 5 -8% range.

Last 50 year average rate is 7.15%.

My 5 year fix @1.79% comes to an end in April and I intend to move to another 5 year fix at whatever the best rate I can find is, already started looking around on the basis that paying the early redemption charge may be worth moving early...