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nick22abdn

Fixed Or Variable Rate Mortgage?

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Just moved house and needing to get a new mortgage. Interested to hear peoples views on future interest rates. I am completely unsure whether it would be better to fix at a relatively low rate for the next couple of years or to get a variable rate.

With the current market turmoil I think they are likely to hold rates or possibly even lower them in the not too distant future. My views for the last 8 months would be that rates would peak at 6% but am now slightly doubtful that they will increase - low CPI and Labour wanting to get re-elected. Your views?

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Fixed Or Variable Rate Mortgage?

I'd say to myself - " I pay my mortgage from my earned income. Does my income go up and down with Bank base rate changes? No, it doesn't - any changes are not linked to base rates. So, if I borrow on a variable rate I'm agreeing to pay the bank in the future whatever they want to ask. Just like signing a contract with Tesco's to buy my supplies from them for 25 years at whatever price they want to charge. That would be stupid. So, why would I do it with a much bigger committment like a mortgage? Only because I think I might benefit from low periods of interest as well as suffer the high. Is it worth the risk? Not to me - I'll have a fixed price one, please. Thank you."

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Just moved house and needing to get a new mortgage. Interested to hear peoples views on future interest rates. I am completely unsure whether it would be better to fix at a relatively low rate for the next couple of years or to get a variable rate.

With the current market turmoil I think they are likely to hold rates or possibly even lower them in the not too distant future. My views for the last 8 months would be that rates would peak at 6% but am now slightly doubtful that they will increase - low CPI and Labour wanting to get re-elected. Your views?

This question came up with a friend of mine on Friday. They are coming to the end ( October) of a 2 year fixed rate where he had the joy of 3.5%. He has had the house for 15 years now so plenty of equity, although he has remortgaged to pay for an extension when they had their second child.

He relies on his financial advisor when it comes to these decisions and is being advised to stay on the variable rate for a while until the IRs drop again. I would have said to try to fix again but I am really not sure now. The best advice I could give was to apply for the best fixed that he could now and see how the next few weeks pan out.

Any better advice?

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...is being advised to stay on the variable rate for a while until the IRs drop again.

Any better advice?

Unfortunately for me this guy's time machine is better than mine.

The choice is not between two guesses at the future it is a choice between the known and the unknown.

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I took out my first mortgage 2 years ago, in July 2005, interest rates were 4.75% and all the media talk of rates was that they had peaked and the only way for them to go was down. I spoke to my mortgage broker about it and his advice was that current interest rates were still historically low and I'd be a fool not to take out a fix. I took that advice.

August 2005, rates were cut to 4.5% but I think you know the rest of the story from there.

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