Uk Re-mortgage. Which Rate In The Current Climate?

[markg]

I know this is a Thailand forum but i was hoping that there may be someone out there to help me a little.

I have a house in the UK. The mortgage rate is about to change from a 2 year fixed rate, back to the standard rate. (I took the mortgage out 2 years ago, for clarification)

As an existing customer, my lender offers me the following.

2 year fixed rate at 4.29 percent.

5 year fixed rate at 4.99 percent

2 year variable starting at 4.29 percent.

Ok, i know nothing about finance and 'markets' and all that stuff. The money of any substantial value i deal with is my mortgage.

My way of thinking is that mortgage rates are pretty low. They can only go up, right? In which case the 5 year fixed rate mortgage may be good in this current financial climate.

What do you guys think is the best bet?

Oh....i rent the house out, and it would probably be easier for me to NOT have the variable rate mortgage.

I guess?

[Khun Jean]

Now it seems banks are lowering their rates. You could go for it now or within a few weeks. I would not wait longer.

I would go for the longest fixed rate period as possible. If inflation hits interest rates will be the first to rise.

even if you have to pay 6% or 7% for the remaining period of the mortgage. Try to get 10-15-30 years.

If everything settles down you can always renegotiate for a better rate, maybe even with a different bank.

Now is the time for security to not have very nasty surprises soon.

A lot of people defaulting on their mortgage is because the interest rates go up. don't be one of them.

I had a free floating interest rate until last year, then i fixed it for 10 years at 3.9%. Another with different conditions is now fixed for 5.8 for 10 years.

The interest saved in the previous years even out the higher ones now. Be save from interest rate hikes.

[markg]

Thank you for your advice K. Jean.

I dont like surprises, and i'm reasonably conservative.

How on earth did you get 10 plus years fixed rate?

i was VERY surprised to view my mortgage lender's web page (the chelsea.co.uk) to find many of their offers have been withdrawn. (though i dont know if that is a recent thing). there were only the 3 offers i outlined above.

If i go for 5 years fixed, i can also actually reduce my mortgage term time by one year whilst keeping the monthly payments the same as the standard rate.

I will skype them tomorrow.

[12DrinkMore]

I would suggest that you go for the longest and lowest, so the five year fix, which is still high in the current climate. Try looking around for a better offer.

This week the MPC idiots will probably reduce the rate but then we are down to zero, Brown's aim. Next step is turn turn on the printing presses.

I think that interest rates will start to rise substantially in 2 to 3 years to curb the rampant inflation, which by then will have either reduced your debts to zero or reduced us all to zero. So go for the longest term possible at the lowest fixed rates you can find. Variable rate will kill you once interest rates start rising rapidly.

[Khun Jean]

Thank you for your advice K. Jean.

I dont like surprises, and i'm reasonably conservative.

How on earth did you get 10 plus years fixed rate?

i was VERY surprised to view my mortgage lender's web page (the chelsea.co.uk) to find many of their offers have been withdrawn. (though i dont know if that is a recent thing). there were only the 3 offers i outlined above.

If i go for 5 years fixed, i can also actually reduce my mortgage term time by one year whilst keeping the monthly payments the same as the standard rate.

I will skype them tomorrow.

Depends on what is common in your country i think. In the Netherlands we have many choices. From 1 month to 30 years.

I went for the 10 years because i think 5 years is a little short for economies to recover from this crisis. It would be devastating to go to 15% after 5 years. In 10 years time at least you have a shot at paying down the principal. I already payed down on the principal for 8 years. That is why 10 years was the best option for me. In your case i would even for longer, like 20 or for however long it takes to pay the complete mortgage.

I had my first mortgage with the bank i used for my salary. The next one was chosen after asking offers from 24!! different banks. The difference between the average offered and the one i got was 1.2%. And that is a lot of money saved over the years.

Edited February 2, 2009 by Khun Jean