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I hadn't realised that it's only very recently that the UK mortgage market became overwhelmingly fixed-rate (media.kbin.social)

submitted 1 year ago by theinspectorst@kbin.social to c/ukeconomy

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[–] theinspectorst@kbin.social 3 points 1 year ago (3 children)

This reality isnt made clear in the application process, they borrow on past performance of your savings and salaries.

A couple of things to bear in mind.

Until last August, mortgage lenders were required to stress test borrowers to check they could continue to repay in the event of a three percentage point increase in rates - that rule at least used to act as a check on people getting completely caught out by rising rates on a go-forward basis.

The other thing to remember is that (abstracting from wider rate changes) your mortgage rate ought to come down over time as you remortgage, as your loan-to-value ratio will improve each month because of your repayments. In a rising rate environment, that at least gives some offset to the rate increases. I'm coming to the end of a 5yr fix but my LTV bracket has improved enough over that period that my monthly mortgage payments ought not to increase horrifically if I do remortgage for another 5yrs.

[–] snacks 3 points 1 year ago (2 children)

All things being equal, we should be ok. What would you do today? I had a chat with a taxi driver last week about his daughter waiting to get a better rate. I suspect it’s very difficult to time anything like this perfectly, you’re always going to potentially lose out if you fix today for 5, but that safety means you can get that equity paid down for 5.

[–] theinspectorst@kbin.social 2 points 1 year ago (1 children)

I expect to go 5yr again because I know I can afford it and I'm risk averse.

Paying up for a 2yr fix now followed by a cheaper 3yr fix when it expires might work out cheaper overall (if rates do come down in 2025/6 as people expect) but there's enough uncertainty in the economy/politics/geopolitics that I'd prefer not to take the chance.

[–] Senseibu 2 points 1 year ago* (last edited 1 year ago)

Mine 5 yr fix ends in early 2027, I think if rates are still high I’ll only fix for 2 years next time, it’s a dice roll but I think eventually we will stabilise around 3-3.5% base rate