I currently have a low variable rate, when should I fix?

Posted on 2 June 2009

I owe £116,815 on my interest only mortgage, I am making a capital payment in December so the balance will be 108k, getting my ltv at 60% borrowing. The mortgage is libor plus 1.5% and I'm only paying 2.77% at the moment. I don't want to fix yet because the interest is very low, when should I look at getting a fixed rate and how long for and what percent? I'm happy to keep making regular yearly capital payments plus I max out my ISA allowance every year to go towards the mortgage in years to come?

When to get into a fixed rate is certainly the big debate in the market at the moment.  It is certain that there is only one way for interest rates to go now, and that is up, but predicting the timing of that is the great challenge.  The factors that you need to consider are where house prices will go in the next few months and how that will affect your LTV, and the movement of fixed rate pricing.  We have seen most fixed rates increase by around 0.5% in the last week, so they are already rising.  It is obviously very difficult, psychologically, to convince yourself to take a fixed rate at around 6% when you are currently paying sub 3%.  That said, we believe that mortgage rates will go up steeply at some point.

Our current advice is to take a fixed for at least five years and get some protection against that coming rises.  Having said all of this, I would strongly advice you to speak to an independent adviser and go through your situation in detail and decide on the best course of action.

Category: Fixed or Variable?, Remortgaging

• Save to del.icio.us
• Digg this story