Hedge your bets on a fixed rates…

So, you know you want a fixed rate mortgage, but you, along with all the rest of us, don’t know if now is the time.

Want to know a way of making this decision easier?

Here goes.

A mortgage offer will last a number of months – 3 – 6 is the common range.

If you apply for a remortgage now, it will take a few weeks to a month for the offer to be issued. You’ve then got a ‘window’ of 3 – 6 months, depending on what lender you use, to decide whether that product looks good enough to take up.

There are two areas for this to be a gamble though.

The really cheap fixed rates don’t include the usual ‘free survey’ = so you may be committing cash to this theory. This will be more likely the larger your mortgage is – small mortgages will benefit more from free fees than a couple of tenths cheaper on the interest rate.

Also, some lenders have become wise to this hedge and if you want to switch product with the same lender they charge an admin fee.

It won’t be right for everyone, but it’s an idea if you’re worried.

Time for a Fixed rate mortgage?

It’s a curious time in the world of mortgages.

There are many people enjoying tracker mortgages with their interest rate set at anything between 0.4% and 2%, but in the back of the minds of those people, they know that interest rates will rise again, the only area of discussion is when and by how much.

There are arguments for a slow steady rise, there are arguments for a rise back to ‘normal’ just as sharp as the fall was. There are arguments that inflation will be rampant following Quantititive Easing that rates will go quite high.

Interestingly, most people buying a house today (with good deposits)  are opting for 5 year fixed rates. When you run a  full search, the costs of a long term fix are similar to the costs of short fixes and trackers, especially if you factor in remortgaging costs at the 2 or 3 year mark.

Here’s the reasoning:

Trackers can only move upwards really, so fixed looks attractive.

A 2 year fixed is cheapest, but if rates are cheap for another year or 18 months, the fixed rate could end right in the ‘eye of the storm’ as rates rise, possibly a very bad time to have to renegotiate your mortgage – lenders offer expensive products when the public is scared and willing to pay a premium for peace of mind.

A 3 year fixed offers only a little extra security over a 2, but are nearly as expensive as the better 5 year deals, so 5 years fixed looks attractive for the right people.

For people moving house, choosing a mortgage is quite easy.

For people currently on cheap trackers, it’s a real dilemna – moving your mortgage from a rate at 1.something to the high 4% range is a very tough call and for me as an adviser, it requires some pretty good ‘predicting the future skills’.

Since we are in unusual times, this skill is completely worthless – there is nobody anywhere that can make this call, no matter how much credibility they have  -  so it becomes a straight gamble.

Nevertheless, it’s a gamble that needs considering, especially if you just can’t afford the mortgage if rates go back up to 6%.

The reason I bring up the subject? The trend for fixed rates is that they have started getting dearer.  I don’t know, but if you’re worried about rates, ‘now’ may be the time to look into this.

Tim & Harriet marriage celebration

Had a brilliant weekend with friends Tim and Harriet in Cornwall to celebrate their marriage.

This was probably the most relaxed and enjoyable weekend I’ve had for a long while, Saturday playing cricket on this beach at Porthtowan.

Saturday evening was spent at the Blue Bar at Porthtowan and included lovely speeches from T & H who make the perfect couple.  You can’t help but feel the lifestyle in Cornwall is so much better than elsewhere that it must contribute towards their obvious  happiness.

And finally, Sunday, on the beach at Perranporth.