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Uf I Could Get A 25 Year Fix At 4.99% I Would Probably Buy

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It might surprise many but the % of people who would take a 25 year fix at 4.99% when say 2 year trackers were at 4.3% and 2 year fixes at 4.5% is very very limited...... 25 year deals would normally be more expensive than the shorter term tracker and fixed deals and people tend to find it very difficult to see beyond the cheaper today argument ( however flawed that is).

Equally Quite a few people feel a complete lack of confidence predicting their futures for the next three years let alone 25 years and while fixes are normally portable they tend not to have as easy out terms as long term fixes in say france.

Rationally long term fixes make a lot of sense but in practice there has been very little demand.

If I was running a bank I might though focus in on that area as I am sure you would attract a better sort of borrower... more thoughtful... less risky... less problematic. While new entrants last time around focussed on the high risk high return end, you might find that the securitisation of the future is based on the low risk low return end of the market.

Looked at longer term most would take a 25 year loan over 4.99%... 4.99% is miles and miles below the average for rates, and I suspect way below what they might be in afew years time.... realistically if a bank were to do it then I reckon 6.00% in the current environment with easy out, low penalty terms would be a good deal.

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a 6 month gilt pays about .5% so the govenrnments short term borrowing is about 3% below most svr rates , 5% below the higher ones , the 25 year gilt is around 4% yield , so for the government banks or any other banks to offer 25 year mortgages you would be looking at a rate of 7% to 9% for you to be borrowing at the same spread to where the government borrows , barclays perpetual debt pays around 10% , so I dont thing the banks will be getting that excited from the money they could lose giving you a 25 year loan at 4.99%

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Are you sure? Wage increases erode your debt, not inflation...

As for the 10 year fix, you still have a mortgage to pay after the 10 years you know. It just doesn't go away.

well of course, if I borrow 100 today, that 100 is 'worth a lot less' in 10 -15 years time as inflation kicks in, so inflation has eroded my debt - it's not '100' any more in 'real terms'.

think back - if you borrowed £30K in 1990, it was a 'decent sized' mortgage - now it's less than one person's credit card..... - ignoring the arguments about house prices, in an inflationary society, the debt is eroded by inflation, irrespective of whether the balance is paid off.

The problem, and for the OP, is if he was in Tokyo in 1989, making this same argument he is now for certainty and a 25 year fix at 5% (or more likely 10% in Tokyo at the time).......... - does he feel lucky ?

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It's a very good question. A relative of mine in the US was absolutely astounded that over here we sign up to mortgages without knowing what the interest rate will be for the whole of the term of the loan.

It also serves to remind us that taking a low rate now may well give us time to repent at leisure if rates spike northwards in a few years time.

+1

Been ringing this bell for the 3 years I've been on HPC.

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+1

Been ringing this bell for the 3 years I've been on HPC.

I must admit I really do think anyone who takes less than a 5yr fixed is deranged.

Consider this for a 2yr mortgage:-

Jan 09 get mortgage offer of mortgage that runs til January 11

Pay fee

Apr 09 complete

Oct 10 got to start thinking about new mortgage

Jan 11 fixed runs out.

So you only actually get 18 months of hassle free mortgage as well as paying a new fee every 2 years.

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Britannia do a 15 year fix. You can get out without penalty every 3 years too. Not a great rate though. And you need a 40% deposit unless you are an existing borrower.

15 Year Fixed Rate

6.49% Fixed for fifteen years, followed by our Standard Variable Rate, currently 4.24% variable for the rest of the mortgage. 6.6% APR

* £0 Arrangement Fee

* Early repayment charges apply for the first 15 years. However you have the opportunity to overpay by any amount, switch to another Britannia mortgage or redeem every 3 years with no early repayment charges

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where in the UK could go up to 14% , has in the past. Madness.

But rates didn't stay super high for long, in that time you can drop to IO, if you don't stretch in the first place you can bare the cost from your wages, and finally if you have built up equity through overpayments whilst times are good (like right now!) you can take repayment holidays with no agreement required (at least my provider NW allows that). Remember the old HPC doctrine: It is always Cyclical! Oh, is it different this time tee hee ;)!

I agree that I don't feel comfortable taking that risk on, but I will ensure I will do things to mitigate the risk. For example overpayments made now due to the £1000s knocked off thanks to current low rates will make a massive difference to your exposure. I'm sure we all know people who have cut their loan duration by 10 years thanks to the recent drops. Don't know what the difference overpayments make - plug some numbers into the excellent mortgagesexposed site spreadsheets.

Not really so bad is it? I am still entirely unconvinced that buying in recent years was such a bad move for some people, sure they paid more for the house, but actually the total cost of ownership may be far less than people buying now but at higher interest rates.

It's not as simple as some make out.

Edited by Orbital

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its all about choices. i appreciate rates could be low for years (like japan) and / or in the longer term could be high (like the 70s). why not take some of the risk out and fix while rates are at historic lows. im not asking too much - base rate is 0.5%, and im sensibly talking 4.99%. these kind of fixes are freely available in the USA for example.

Because everyone and his monkey knows that the BOE base rate is artifically low, subsidised by the tax payer. IR will have to rise sooner or later and the sh*t will then hit the fan.

The other reason why banks only offered short terms is because this is what the market wanted. The greedy public (including FTB) was interested in flipping houses and getting rich. Having a long term mortage normally means higher exit penalties.

The sooner the IR returns to sanity the better IMHO, but we may have to wait until after the general election in 2010.

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Britannia do a 15 year fix. You can get out without penalty every 3 years too. Not a great rate though. And you need a 40% deposit unless you are an existing borrower.

15 Year Fixed Rate

6.49% Fixed for fifteen years, followed by our Standard Variable Rate, currently 4.24% variable for the rest of the mortgage. 6.6% APR

* £0 Arrangement Fee

* Early repayment charges apply for the first 15 years. However you have the opportunity to overpay by any amount, switch to another Britannia mortgage or redeem every 3 years with no early repayment charges

I have taken this one. I only had 25% deposit which came in at about 6%. As another poster mentioned, why pay set-up fees every few years? With no arrangement fee, I thought this one panned out ok over the term. I was interested in the ability to exit every three years FOC as well.

Just need to crank up those overpayments now...

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I must admit I really do think anyone who takes less than a 5yr fixed is deranged.

Consider this for a 2yr mortgage:-

Jan 09 get mortgage offer of mortgage that runs til January 11

Pay fee

Apr 09 complete

Oct 10 got to start thinking about new mortgage

Jan 11 fixed runs out.

So you only actually get 18 months of hassle free mortgage as well as paying a new fee every 2 years.

Looking at some of the number on moneyfacts

Best 2 year fix is 3.59%, best 5 year fix is 4.99%

For those with say a mortgage of 500k, this is a difference of 7.4k pa, and you will have to pay and additional £500pa in fees. Personally I will be going onto a variable, best I can see is sub 3% (I'm not sure if anyone can get 1.99%), as I can't see the Gunment putting rates up any time soon, and I am prepared to take the risk that they do for the savings I will get.

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Long term fixed rates you have to read the small print as if you remortgage / sell up etc prior to the expiration of the the fixed rate expiring there are huge penalty costs the further you are away from expiration . Always when getting a fixed rate make sure you ask the question what are the costs if I remortgage / sell up prior to the fixed rate expiring .

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The average BOE base rate over the past 50 or 60 years has been about 7%

Then add a margin for the banks, say 1% - this gives an average mortgage rate of 8%

If you can fix for 25 years at any rate below that it's a good deal.

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