Variable or Fixed

B

bk777

Registered User
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I am currently converting my mortgage from an interest only buy to let to a homeloan with EBS.
They have given me options for variable and fixed (see below) but seem to be pushing me towards variable saying I can changed to fixed at any time. I am fiding it hard to make a decisin on the best option - can anyone advise ? Thanks, Barry

3.7% Standard Variable

or

5 yr fixed rate 3.8%
3 yr fixed rate 3.65%
 
Nobody can predict future interest rates but if I was in your position I would opt for the variable rate given those options.
 
Thanks Sarenco. I suppose given how low the rates have been for some time I am wondering if a rise is likely soon ?
 
While I cannot predict future interest rates, in my humble opinion there is practically zero chance that the ECB will raise its main refinancing rate in the next 12 months.

On balance, I would expect mortgage rates offered by our lenders to fall modestly over the course of 2016 as (a) trackers continue to be paid down; (b) default rates stabilise due to an improving labour market; and (c) competitive pressures intensify.

But, hey, I could be completely wrong!

Having said all that, if you find uncertainty particularly uncomfortable, perhaps because of your particular financial circumstances, then a fixed rate option might make well sense for you.
 
Personally I would go for the 5 year fixed. 3.8% is a good fixed rate in comparison to the 3.7% variable.
You don't know if EBS will pass on any future rate cuts to you or rate hikes so if you like the stability of a fixed rate then go for that.

ECB wont increase rates for at least a year I would say but 5 years is a long time so no one knows what will happen.
 
Thanks for the comments Aristotle and Sarenco. If I say on variable and wait t out and rates rise I assume I will be looking at an increased rate if I decide to fix at that point ?
 
The question you should ask yourself is do you need to know the exact cost of your mortgage for the next3 years or the next 5 years. If you do, then fix. If you don't, then trying to second guess the market by fixing is a gamble. Fixed rates mean the bank is taking a punt on the rates instead of you - they tend to be higher as a result, they need to build in their own certainty. If their fixed rates are fairly low or similar to the variable then it is more likely the bank's view is that the upward pressure on variable rates is relatively low. As Sarenco has said above, there is little evidence of ECB rates changing within the next 12 month.

Yes, if the variable rates start to increase, the fixed rates they offer new customers will increase too.
 
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