The market expects interest rates to rise gradually, as hinted by Mark Carney

Fixed rates will take a conservative view on how gradually - so towards the more enthusiastic end of what is likely in terms of interest rate hikes - and price that in to what they charge over whatever term the fix is for.

If you take a variable rate you take on risk, and in particular the risk that interest rates run hot. Your reward is that if the market doesn't run hot you will pay less than someone on a fix.

If you take a fixed rate your reward is that you have known costs, which you can budget against your salary and so on. The risk you take in is the risk of paying more - maybe substantially more if interest rates don't go up that much - than you otherwise would have.

It's a question of which risk you find most palatable.

You could also try to take a "considered view of the market" or some such. The odds of any of us knowing how to do that better than the people the big banks employ to do it is not high; and in any event we're all gambling because no-one actually knows. Anyone who tells you they do is lying. And that's before you factor in Brexit, which no-one can cost in accurately because we still don't actually know what a Brexit is in tangible terms.

I personally am on a tracker because I signed up when interest rates were high, so I have a ludicrously good deal (base rate plus 0.75%). If I didn't have that I'd probably still go for a tracker but set aside all the money I saved against a fix, so that if interest rates exploded I had that extra saved up, and if they don't I can have a really very nice bottle of gin indeed off the proceeds.

However I am not you and you are not me and it really depends on which risk you feel most comfortable with. A lot like the security of known outgoings, and are prepared to risk paying a bit more to get that, which is completely sensible.

Posted By: Old Man on October 2nd 2018 at 08:26:55

Message Thread

Mortgage chat (General Chat) - MIKEWALKER, Oct 2, 06:55:30
- The market expects interest rates to rise gradually, as hinted by Mark Carney (General Chat) - Old Man, Oct 2, 08:26:55
  - thank you very much for the information Old Man (n/m) (General Chat) - MIKEWALKER, Oct 2, 11:07:02
  - Para 5 is on the money (General Chat) - CWC, Oct 2, 09:03:42
    - Brexit means Brexit tbf (n/m) (General Chat) - SCC 28, Oct 2, 09:08:34
      - Brexit means Bullshit (General Chat) - Dunney, Oct 2, 09:35:48
        
        Interesting Brexit thread here (General Chat) - SCC 28, Oct 2, 09:42:26
        
        Yes I'd seen that (General Chat) - Dunney, Oct 2, 09:51:27
      - Quite (General Chat) - CWC, Oct 2, 09:10:39
        
        lilac - that's what you get when you mix red, white and blue entut? (General Chat) - Ralf Scrampton, Oct 2, 10:14:36
        
        shit coloured brown (General Chat) - CWC, Oct 2, 11:46:14
- As an 'accountant' I'd go fixed for 2 years (General Chat) - Worthing Yellow, Oct 2, 07:18:02
  - Tracker always (General Chat) - jonnym6, Oct 2, 10:09:24
  - Tsb 10 year fix and flex (General Chat) - CWC, Oct 2, 07:27:23
    - Not bad depending on rate... I'd have to do a discounted cash flow (n/m) (General Chat) - Worthing Yellow, Oct 2, 08:27:03
  - Any idea when it will improve (General Chat) - SCC 28, Oct 2, 07:26:07
  - but if the economy doesn't improve (General Chat) - ghostof barry butler, Oct 2, 07:25:08
    - Easier to budget but you'll have to pay more for the privilege (General Chat) - Worthing Yellow, Oct 2, 08:23:29
- Hedge your bets and open a hedge fund (n/m) (General Chat) - essexcanaryOTBC, Oct 2, 07:08:29
- Fixed. Inflation will rise and interest rates will follow. (n/m) (General Chat) - Augustus Pablo, Oct 2, 07:01:51
  - They probably will but not rapidly... (General Chat) - jonnym6, Oct 2, 11:11:29

Reply to Message

In order to add a post to the WotB Message Board you must be a registered WotB user.

If you are not yet registered then please visit the registration page. You should ensure that their browser is setup to accept cookies.