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A good time to gamble?
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There’s never a good time to put your finances at risk, but with low interest rates predicted for some time to come, is it time to abandon fixed mortgages?
Now is an incredibly difficult time for anyone looking to remortgage.
On the one hand, interest rates are at rock bottom and many people believe they’ll stay there for years. On the other, these predictions might be wrong – and no one wants to gamble when it comes to their home.
The Council of Mortgage Lenders (CML) reported a 2% rise in lending from August to September but explained that this has been driven by new buyers.
Rather than remortgaging, many homeowners are choosing to stick with their current providers even after their deals have ended, suggesting a number of homeowners are unsure which way to jump.
Taking a gamble
According to the prestigious Centre for Economics and Business Research (CEBR), interest rates could well stay low for the next five years. It’s predicted the base rate will stick at 0.5% for the foreseeable future and will still be less than 2% in 2014 – driven by unemployment and a struggling economy.
cut home costs
Of course, if it’s right then tracker mortgages should be the loan of choice if you’re looking for a new deal.
Homeowners pay a premium if they want to fix their mortgage payments: the best fixed rates are usually up to 1% higher than the best trackers. Having said that, analysts can get it very wrong. It would have been impossible to foresee the base rate plummeting to 0.5% before the credit crunch kicked in.
Many homeowners will be happy to pay a premium to avoid the possibility of their repayments shooting upwards. If you’re worried about your finances, you won’t want to gamble on the base rate.
by Felicity King-Evans, moneysupermarket.com
