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[Field Marshal Dr. Opti]

I'm currently paying 4.49%......SVR.

I've been offered two fixed rates.

3.59% for 3 years .........or 3.75% for five years. The difference is about £11 per month.

Which package would you choose?

Where will interest rates be in three or five years?

I originally thought that the 3 year fixed rate was best, but now I'm not so sure.

My crystal ball is cloudy and unclear.

[Kevin Wood]

The fact that there's not much to choose between the rates speaks volumes about what the lender's projections are. The question is: What rate are you likely to be able to get at the end of a 3 year term?

[Rog]

Where will interest rates be in three or five years?

I've had a word with Mr Carney. he'll be putting up the base rate by 2% every three months till we get up to 16%, and then he will keep it there for a very long time 

Oh dear . . . . Opti ? Are you ok ?  quick call an ambulance . . . . . .

[Field Marshal Dr. Opti]

The fact that there's not much to choose between the rates speaks volumes about what the lender's projections are. The question is: What rate are you likely to be able to get at the end of a 3 year term?

I'm guessing that the 0.5% we currently enjoy will be just a distant memory. So, base rate around 3%......mortgage rates around 6%........But what do I know.

[Field Marshal Dr. Opti]

Where will interest rates be in three or five years?

I've had a word with Mr Carney. he'll be putting up the base rate by 2% every three months till we get up to 16%, and then he will keep it there for a very long time 

Oh dear . . . . Opti ? Are you ok ?  quick call an ambulance . . . . . .

  No shit, Rog. ........but should this 'nightmare scenario' actually happen, you may well be closer to the truth than you think.

[steve6367]

Have you been to an independent advisor with access to the whole market? Unless you are a bad risk, high LTV, poor credit history etc you should be able to do better than those rates.

Steve

[zirk]

I reckon it will stay low for the next 3 years, last thing the Government or B of E need to do now is inflate interest.

[Sir Tigger KC]

Carney has already said that barring a dramatic rise in inflation, interest rates will stay low until employment drops to 7% 

However, there are many external factors that could affect things, such as a civil war in Egypt forcing closure of the Suez Canal, which would cause crude oil prices to rocket and then fuel prices would go up, which in turn would stoke inflation! 

So who knows what the future might bring, hopefully it won't be armageddon any time soon though! 

[Field Marshal Dr. Opti]

Have you been to an independent advisor with access to the whole market? Unless you are a bad risk, high LTV, poor credit history etc you should be able to do better than those rates.

Steve

I can, down to 2%......but they all come linked to ridiculous 'administration fees' of up to £3,000. Defeats the purpose of looking for a better deal.

[Kevin Wood]

I reckon it will stay low for the next 3 years, last thing the Government or B of E need to do now is inflate interest.

Indeed, and reading into the rates quoted, that's what the lenders think too.

It's worth shopping around, though, as said. I've always found London and Country pretty helpful, but others do exist, etc. http://www.lcplc.co.uk/

[Kevin Wood]

Have you been to an independent advisor with access to the whole market? Unless you are a bad risk, high LTV, poor credit history etc you should be able to do better than those rates.

Steve

I can, down to 2%......but they all come linked to ridiculous 'administration fees' of up to £3,000. Defeats the purpose of looking for a better deal.

Always worth looking at the cost to you over the term, though. Admin fees are a conway of keeping the headline figure low, and hiding the true cost of then loan, and bear in mind you're paying that sum up-front - unless they're adding it to the loan amount, in which case you're paying interest on it.

[Rods2]

Have you been to an independent advisor with access to the whole market? Unless you are a bad risk, high LTV, poor credit history etc you should be able to do better than those rates.

Steve

I can, down to 2%......but they all come linked to ridiculous 'administration fees' of up to £3,000. Defeats the purpose of looking for a better deal.

I think there are two question here, what will the rate be in 3 years and what will they be in 5 years? As these are the points where you will have to renew.

The BOE policy is to keep interest rates low for the foreseeable future until unemployment drops below 7% or inflation goes significantly above 5% 2.5%.

At the current 0.5% base rate the song by Yazz sums up interest rates: "The only way is up".

Now the Government will do all it can to provide an economic feel good factor for the election in 2 years time. After that who knows, what will happen to interest rates, but I think if a recovery has taken hold then with all of the QE money sloshing around in the UK and company profits being hammered since 2007, that they will try to restore them which will mean higher inflation. Add in ever rising energy prices, where UK fracking will have had no impact by then, then I think there is going to be inflationary pressures, but as a borrower, inflation is your friend for the capital, but your enemy for interest rates, as they will be under pressure to rise. If the economic growth does not reach launch velocity so growth continues to be very weak, then ZIRP will continue.

At the moment as a result of the US threatening to taper their QE program, their bond prices have dropped which means yields have risen so they have gone from around 1.7% to 2.7% for 10 years bonds. The same has happened in the UK. How long before real market rates affect what the Government does with official rates, who knows?

Whichever you pick, you could use the savings to accelerate the rate you pay back the capital, so after 3 or 5 years, whatever the market rate, you will have £4000-£7000 less capital to pay interest on which will soften the blow whatever the rates are. Thinking about it, the last sentence actually probably helps provide the answer. I know which I would choose, but that is me and it is your decision.

This is of course assuming where you are one of the richest people in the UK on OOF that in 3 or 5 years, you won't just pay off the mortgage balance from a bit of loose change (by your standards) you have lying around. 

[Field Marshal Dr. Opti]

I reckon it will stay low for the next 3 years, last thing the Government or B of E need to do now is inflate interest.

Indeed, and reading into the rates quoted, that's what the lenders think too.

It's worth shopping around, though, as said. I've always found London and Country pretty helpful, but others do exist, etc. http://www.lcplc.co.uk/[/url]

Thanks, Kevin.

I shall digest this at some length.

[Field Marshal Dr. Opti]

Have you been to an independent advisor with access to the whole market? Unless you are a bad risk, high LTV, poor credit history etc you should be able to do better than those rates.

Steve

I can, down to 2%......but they all come linked to ridiculous 'administration fees' of up to £3,000. Defeats the purpose of looking for a better deal.

I think there are two question here, what will the rate be in 3 years and what will they be in 5 years? As these are the points where you will have to renew.

The BOE policy is to keep interest rates low for the foreseeable future until unemployment drops below 7% or inflation goes significantly above 5% 2.5%.

At the current 0.5% base rate the song by Yazz sums up interest rates: "The only way is up".

Now the Government will do all it can to provide an economic feel good factor for the election in 2 years time. After that who knows, what will happen to interest rates, but I think if a recovery has taken hold then with all of the QE money sloshing around in the UK and company profits being hammered since 2007, that they will try to restore them which will mean higher inflation. Add in ever rising energy prices, where UK fracking will have had no impact by then, then I think there is going to be inflationary pressures, but as a borrower, inflation is your friend for the capital, but your enemy for interest rates, as they will be under pressure to rise. If the economic growth does not reach launch velocity so growth continues to be very weak, then ZIRP will continue.

At the moment as a result of the US threatening to taper their QE program, their bond prices have dropped which means yields have risen so they have gone from around 1.7% to 2.7% for 10 years bonds. The same has happened in the UK. How long before real market rates affect what the Government does with official rates, who knows?

Whichever you pick, you could use the savings to accelerate the rate you pay back the capital, so after 3 or 5 years, whatever the market rate, you will have £4000-£7000 less capital to pay interest on which will soften the blow whatever the rates are. Thinking about it, the last sentence actually probably helps provide the answer. I know which I would choose, but that is me and it is your decision.

This is of course assuming where you are one of the richest people in the UK on OOF that in 3 or 5 years, you won't just pay off the mortgage balance from a bit of loose change (by your standards) you have lying around. 

Er...not exactly, Mr Rods.

When I think of my financial position words like destitute....impoverished and piss poor spring to mind.

Informed piece as usual.

[steve6367]

Have you been to an independent advisor with access to the whole market? Unless you are a bad risk, high LTV, poor credit history etc you should be able to do better than those rates.

Steve

I can, down to 2%......but they all come linked to ridiculous 'administration fees' of up to £3,000. Defeats the purpose of looking for a better deal.

Sounds like you have looked and without the details I can't say for sure but you really should be able to find a lower rate without a silly fee. A good advisor will show you the total cost over a term of your choice 3 / 5/ 10 years including fees.

On the original question of what will rates do, fix or not I would not fix at this time - you can get such a good deal on a tracker there seems little point, unless you think rates are going to rocket - which I don't. That is only my opinion though :-)

Steve