Following On From My "offer Accepted"

[ExeC]

Well following on from my Offer Accepted Threed Id like to thank a lot of you for the nice comments and lack of trolls!

I visited the mortgage broker to discuss which type of mortgage to take,

We finally came to 2 which I explained before, a Nationwide 5 Year Fixed and a 10 Year fixed (Difference of about .40% on the 10 Year).

The mortgage guy has advised me NOT to go with the 10 Year as its a long time to be fixed to a mortgage, as he thinks rates will be going down .25% near the end of the year.

1. Any opinions on the mortgage guys views that rates will drop near the end of the year?

2. Also any views on if taking a 5 year will release me out the mortgage at the wrong/right time?

Id prefer some comments in regards to the questions though, not just "You Stupid Ba***rd, why you buying now".

I see a lot of debate about crashes etc, wouldnt mind a threed about which mortgage would be the best one in the current climate / next 5-10 years for FTB's like me who have taken the decision to buy.

[vicster]

Hi ExeC - we're in the same situation so I'm interested too. I think there might be more relevant places to post but like you I value the input of many of the posters here. So

BUMP!

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And I hope I'm not going to fulfill my usual role here of threadkiller

My gut reaction is to go for the ten year, but having said that

a ) I don't really know what I'm talking about

and

b ) Mr Vicster is having the final say and it'll probably be a 5 year that we go for.

I'm concerned about the effect a Tory government will have on interest rates, in 5 years. But then I suppose if we do have a Tory government the worst damage will be done in ten years time

Edited March 27, 2006 by vicster

[LazyDay]

We finally came to 2 which I explained before, a Nationwide 5 Year Fixed and a 10 Year fixed (Difference of about .40% on the 10 Year).

Between these two I would have preferred the 10 Year fixed, precisely because:

taking a 5 year will release me out the mortgage at the wrong time

Edited March 27, 2006 by LazyDay

[vicster]

but it might be even worse in 2016

Edited March 27, 2006 by vicster

[ExeC]

So all the clever stuff aside that black line should be above the gold one?

[LazyDay]

but it mgiht be even worse in 2016

By that time it will be less painful, provided you are paying off the principal in the meantime.

[okonu]

Hmm. Your job is selling mortgages. You get commission when you sell a mortgage.

Do you sell the 5 year fix, or the ten year fix, knowing there is good chance that the buyer will remortgage when the fix is up...?

Also, what repayment possibilities? i.e. if you get some extra cash/ payrises, can you throw it at the mortgage for no fee to reduce the principle?

How long is the mortgage - can you go for a ten year one? Then every payment is fixed.

[ExeC]

Hmm. Your job is selling mortgages. You get commission when you sell a mortgage.

Do you sell the 5 year fix, or the ten year fix, knowing there is good chance that the buyer will remortgage when the fix is up...?

Also, what repayment possibilities? i.e. if you get some extra cash/ payrises, can you throw it at the mortgage for no fee to reduce the principle?

How long is the mortgage - can you go for a ten year one? Then every payment is fixed.

I think im just looking for clarification that 10 year would be wiser than 5 year.

It seems people with homes feel like 10 years is silly, ie. Mortgage guy, Parents, friends with homes.

People on here seem more clued up, outside this forum i hear things like "interests rates could go down a fair bit then you will miss out" etc..

and after hearing it from a lot of people you tend to think, maybe theyre right, but then a few posts on a forum and your options can get balanced again.

[aussieboy]

I'm not sure I could commit to live in the same place for 10 years, nor could I stomach paying the early repayment penalities, so I would probably look closely at the 5 year option.

[non-FTBer]

I'd personally fix for as long as possible at present.

Like Bubb said, the sensible money SEEMS to be on IR increases not falls for the immediate future.

My gut feel is that we could be seeing even higher rates further out, but thats just in my opinion.

This will all depend on how much risk you want.

The longer you fix for the easier it is to remove risk from the decisions you make.

If you assume that IRs remain static then how much more would the 10 year fix cost (assuming the 5 year rate continued for 10 years)??

Thats your premium for removing the risk of IR increases. Is it worth it?

Also worth looking at the penalties for early redemption of the 10 year fix.

Its funny that most people do not realise that they are gambling on quite a few different factors when they buy a house with a mortgage (IRs, House Prices, Inflation) and fixed rate mortgages are just allowing you to 'hedge your bets' against one of these factors.

[Tent]

Financial advisers should have health warnings attached to them. Yes of course he wants you to go for a shorter term so that he can sell you another mortgage and raise some more commision for himself in 5 years.

No one can predict exactly what will happen to future rates so you have to cover all angles. Will you be staying put for 10 years or wanting to trade up (or down) in 5 years?

If you gamble that rates go down in 5 years then you will make a saving but they would have to go down enought to cover the remortgaing costs. With a 10 year deal you wouldn't be any worse off.

If you gamble that rates will be up in 5 years then you will loose out twice. Once due to the rate increase and secondly due to the remortgage costs. With a 10 year deal you wouldn't be any worse off.

In the curent climate you have to ask yourself how high or low could rates go in a 10 year period and then decide which would have the biggest inpact on your financial security.

[Given Up]

I can't work out whether you have penalties for redeeming the 5 or 10 year fixed mortgages early.

My view is that I would prefer to have certainty so go for a longer term fixed.

However, if you have early repayment penalties, work out how much interest rates would need to drop before it made sense to cahne to a different mortgage.

[Guest]

I'm concerned about the effect a Tory government will have on interest rates, in 5 years. But then I suppose if we do have a Tory government the worst damage will be done in ten years time

What?

Do you expect them to go to 25% or something?

Can you not afford to price in interest rates of, say, 10%?

I don't understand the "damage" you expect a Tory government to inflict. Last time around, rates went from 8% to 15% during the boom itself. Silly people over borrowed and busted themselves. The British people coupled with irresponsible unregulated VIs brought down their own housing market by reckless borrowing.

The Bank Of England now sets interest rates, and does not have as its agenda a mission to protect YOU. It has a mission to suppress inflation, and to ensure currency stability as its two primary remits.

Interest rates bob up and down all the time, although they have been on a downward trend over the past 30 years, led by the USA.

US rates are now going up in earnest. Before this period of ultra-cheap money, US rates were 6% before they slammed them down to 1%. If you read any financial stuff, it's not long before you hear commentators talking of "too much money in the world", leading to "poor returns on investments" and central bankers with "inflation fears": Is all this cheap money going to leak out of asset bubbles into OTHER STUFF?

If so, they're gonna raise rates to try to mop it up, or we'll all be paying more money for everything we buy in the shops, and at the petrol pump. Some say this is precisely what's happening right now. Does it matter if you're paying low interest on your house if your supermarket and energy bills rocket while your salary remains depressed because of outsourcing?

Can't have it both ways.

Edited March 27, 2006 by megaflop

[okonu]

Ah, OK.

Ten year fix all the way then baby. With all the other uncertainties out there, won't fixing a big % of your outgoings for next ten years make life simpler?

And then - don't worry about it. If IR's drop, don't beat yourself up. If they rise, don't consider yourself a fixed income genius. What is the correct decision for you now...

[non-FTBer]

Next FED rate rise looks like a certainty.

BoJ seem to be posturing for imminent IR increases.

Next movement of the BOE rate will probably be political IMHO, otherwise I'd already have expected it to go up.

If GB wants to keep swimming against the tide then the IR rises will have to be faster when they do come.

IRs are currently well below 'neutral' level, and below long-term historical average.... do you really think that this 'economic miracle' of GBs will continue??

"damage" you expect a Tory government to inflict...

The damage was nothing more than correcting excesses.

John Major left the UK economy in great shape when labour took over.

GB has managed to wreck it again.

The problem is that their political & fiscal actions take a long time to beat fruit.

And he who sows it does not eat it, his successor does.

I agree completely.

The Tories made people go through some pain (and get flak for it) but it was neccessary pain.

GB has completely wrecked the stable economy built by the Tories.

Don't get me wrong... the Tories aren't neccessarily the answer to the current Nu Liebour (as Cameron seems to be of the same cloth as TB).

GB should be soon eating his own shite, but i doubt he will have to do so for long

I sincerely hope you are right.

He deserves to be lynched. But will the public ever realise it 'wos him what done it'?

[Tent]

Note that you can get 10 year deals that allow overpayments without penalty (for example 10% of the remaining amount) and allow you to take the mortgage with you if you move. So the redemption penalty is only a factor if you think you can pay it off within 10 years.

[Tinks]

Abbey's 5 year fix went up by 0.05% last Friday so draw your own conclusions ......

[aussieboy]

Financial advisers should have health warnings attached to them. Yes of course he wants you to go for a shorter term so that he can sell you another mortgage and raise some more commision for himself in 5 years.SNIP

Does anyone think that far in advance in their careers, and for such a small amount of pay? How many people think they'll be in the same role on 5 years even in a stable industry let alone financial products broking?

From experience, I would give the broker the benefit of the doubt and take what they recommend at face value: I've always found their advice to be very good. Unlike EAs, these guys are regulated to within an inch of their lives (c.f. the endowment debacle et al.)

[Tent]

Does anyone think that far in advance in their careers, and for such a small amount of pay? How many people think they'll be in the same role on 5 years even in a stable industry let alone financial products broking?

From experience, I would give the broker the benefit of the doubt and take what they recommend at face value: I've always found their advice to be very good. Unlike EAs, these guys are regulated to within an inch of their lives (c.f. the endowment debacle et al.)

Now what was that about endownment misselling....

[aussieboy]

Now what was that about endownment misselling....

... which is why they are now so highly regulated, which is why I mentioned endowment specifically in my post.

How long ago were those mortgage sold?

[Guest consa]

If you have a partner go for 5yrs and if you are single go for the 10yr, the average time someone stays in a property is 7yrs and I suspect the average marriage is 7yrs due to the 7yr itch or something like that.

This is not advice just IMO BTW

Oh and about advisors, well I was around one's house a couple of months back surveying, he was on the telephone to a client telling them what a wonderful idea an IO mortgage was, I nearly said something but decided to bite my lip and smile.

It sounded like he was convinced it was the way to go

Edited March 27, 2006 by consa

[ExeC]

Something interesting by the way,

We found the house on rightmove, it was put on as i said before at a lower than average price for the area because they needed to move. We offered 4k less than this and it was finally accepted.

We found on sunday after its all accepted they removed it from the Rightmove site, most other houses have "Sold STC" on the page and the house remains for monitoring or whatever.

But this was removed, could this be so they can skew the figures ? I thought it was interesting anyway..

[the end is a bit nigher]

if we'd had a tory government we wouldn't be in this mess now

speaking to a MA at the Halifax recently, she too was touting IR cuts, albeit a slim chance - i explained about IR futures...........................

[sign_of_the_times]

GB should be soon eating his own shite,

hope you're right Doc

[Londoner]

If any kind of commision was involved then surely the adviser would have got more for sellling a 10yr fixed, since that would have locked the customer in for a guaranteed 10 years as opposed to 5? Sounds to me like he was giving his honest opinion.

I recently signed up for a 2yr fixed because basically it seemed a bit futile trying to guess what would happen to IRs beyond that time and I would have the freedom to change after 2 yrs.

If I lose out due to falling IRs, it will only be for a short time and if I gain, well, all well and good. I will just have to shop for the most competitive deal after 2yrs.