What would have happened if we fixed when rates were at a record low?

[monkeyboy]

This is my question. I dont remeber the lenders ever advising us to fix when rates were at their lowest, obviously then they would have carried the risk of increased rates on these loans.

If I had of fixed for say 10 years at the lowest point would I be laughing now? woul my lender end up getting my cash to loan me for more than I was paying?

Is it a case that they encourage variable and short term fixed when rates are low and then gradually start to sell fixed deals as rates rise and their risk lessened but the premium on these loans makes it more viable too?

Core question for me: Are the lenders the people who had most to lose if every body ran out and fixed at the lowest interest rate for a long period?

This is not my field and if my thoughts are way off the mark I would gladly be corrected.

Cheers

 

[CelloPoint]

Re: What would have happened if we fixed when rates were at a record low??

This is my question. I dont remeber the lenders ever advising us to fix when rates were at their lowest, obviously then they would have carried the risk of increased rates on these loans.

If I had of fixed for say 10 years at the lowest point would I be laughing now? woul my lender end up getting my cash to loan me for more than I was paying?

Is it a case that they encourage variable and short term fixed when rates are low and then gradually start to sell fixed deals as rates rise and their risk lessened but the premium on these loans makes it more viable too?

Core question for me: Are the lenders the people who had most to lose if every body ran out and fixed at the lowest interest rate for a long period?

This is not my field and if my thoughts are way off the mark I would gladly be corrected.

Cheers

I would be very interested if anyone had statistics on the cost of 10 year fixed mortgages over the last 10 years. I doubt this kind of information is freely available? I'm sure the banks would have published it somewhere, but getting historic data is very hard...

 

[Sarah W]

Re: What would have happened if we fixed when rates were at a record low??

This is my question. I dont remeber the lenders ever advising us to fix when rates were at their lowest, obviously then they would have carried the risk of increased rates on these loans.

If I had of fixed for say 10 years at the lowest point would I be laughing now? woul my lender end up getting my cash to loan me for more than I was paying?

Is it a case that they encourage variable and short term fixed when rates are low and then gradually start to sell fixed deals as rates rise and their risk lessened but the premium on these loans makes it more viable too?

Core question for me: Are the lenders the people who had most to lose if every body ran out and fixed at the lowest interest rate for a long period?

This is not my field and if my thoughts are way off the mark I would gladly be corrected.

Cheers

Lenders fund fixed rate mortgages by buying fixed rate contracts on the money markets so if rates subsequently go up or down it makes no more difference to them than it does to the fixed rate borrower - their profit margin is set when they buy the money. Lenders have offered fixed rates (generally 1, 2, 3, 5 and 10 year periods) throughout the recent low interest rate era - it's not up to them to advise borrowers en masse to fix their mortgages; there is no "one size fits all" mortgage.

Sarah

www.rea.ie

 

[asdfg]

Re: What would have happened if we fixed when rates were at a record low??

Generally, the longer you fix a rate the higher the interest rate. You pay this rate from day one instead of a gradual rate increase over a period of time. It is only when the variable rate is greater than the fixed rate by a similar time period that the person on the fixed rate starts to gain.

Example
Lender 1 takes out a fixed rate mort of 4%
Lender 2 takes out a variable rate mort of 3%
The variable rate increases after 6 months to 4%
6 months later the variable rate increases to 5%

It is another 6 months (18 months in total from the date of the original mortgages were taken out) before the lender on the variable rate catches up with what the lender on the fixed rate has paid and the person on the fixed rate is in a better position.

Difficult to get out of a fixed mort without penalty. When fixing say 10 years are you sure you will want to be in that house in 10 years. what if you split up in the meanwhile? We don't know what the future holds

 

[ClubMan]

Re: What would have happened if we fixed when rates were at a record low??

This is my question. I dont remeber the lenders ever advising us to fix when rates were at their lowest, obviously then they would have carried the risk of increased rates on these loans.

You should not depend on a lender or anyone else with a vested interest in selling you something for independent advice. You should also only fix your mortgage rate if you need the predictability of fixed repayments and cannot affort variable/fluctuating repayments. Don't bother attempting to time the market, second guess the financial institutions and fix in an attempt to save on interest charges in the medium/long term. In most cases you will pay a premium over and above the most competitive tracker/variable rate for your situation by fixing especially if you ever find that you need to break the fixed rate period (e.g. by moving house or paying off the mortgage early in part or full).

 

[monkeyboy]

Re: What would have happened if we fixed when rates were at a record low??

Lenders fund fixed rate mortgages by buying fixed rate contracts on the money markets so if rates subsequently go up or down it makes no more difference to them than it does to the fixed rate borrower - their profit margin is set when they buy the money. Lenders have offered fixed rates (generally 1, 2, 3, 5 and 10 year periods) throughout the recent low interest rate era - it's not up to them to advise borrowers en masse to fix their mortgages; there is no "one size fits all" mortgage.

Sarah

Cheers I always thought the premium paid was to cover the risk to the lender but from what I understnad from the above the rpemium is to pay the lenders prmium that they buy their mony from to a larger lending agency above in the chain...these premiums then carry up the chain to where a very large lender??? carries the risk but with economies of scale and many bases covered?

 

[monkeyboy]

Re: What would have happened if we fixed when rates were at a record low??

You should not depend on a lender or anyone else with a vested interest in selling you something for independent advice. You should also only fix your mortgage rate if you need the predictability of fixed repayments and cannot affort variable/fluctuating repayments. Don't bother attempting to time the market, second guess the financial institutions and fix in an attempt to save on interest charges in the medium/long term. In most cases you will pay a premium over and above the most competitive tracker/variable rate for your situation by fixing especially if you ever find that you need to break the fixed rate period (e.g. by moving house or paying off the mortgage early in part or full).

Agreed that was exactly my suspicion...when rtes were low the lenders never mentioned ( to my recollection or observation ) or gave a peep about people fixing as rates can only go up. These instittions knowing this better tha most...But as rates rose I feel I noticed more fixed rate advertising...ie when lenders knew that this was a safer time to sell this product at their premium .

Just my thought but as above it would be very very iteresting to here some numbers of how things would be panning out for someone like this.

 

[Sarah W]

Re: What would have happened if we fixed when rates were at a record low??

Agreed that was exactly my suspicion...when rtes were low the lenders never mentioned ( to my recollection or observation ) or gave a peep about people fixing as rates can only go up. These instittions knowing this better tha most...But as rates rose I feel I noticed more fixed rate advertising...ie when lenders knew that this was a safer time to sell this product at their premium .

Just my thought but as above it would be very very iteresting to here some numbers of how things would be panning out for someone like this.

Rubbish. As I stated before lenders have always offered a range of fixed rates.

Sarah

www.rea.ie

 

[ClubMan]

Re: What would have happened if we fixed when rates were at a record low??

Agreed that was exactly my suspicion...when rtes were low the lenders never mentioned ( to my recollection or observation ) or gave a peep about people fixing as rates can only go up. These instittions knowing this better tha most...But as rates rose I feel I noticed more fixed rate advertising...ie when lenders knew that this was a safer time to sell this product at their premium .

So what? The banks are in the business of making money. Borrowers need to take care of their own needs by shopping around as widely as possible and by gettting idependent, professional advice if necessary.

 

[nlgbbbblth]

Re: What would have happened if we fixed when rates were at a record low??

Agreed that was exactly my suspicion...when rtes were low the lenders never mentioned ( to my recollection or observation ) or gave a peep about people fixing as rates can only go up. These instittions knowing this better tha most...But as rates rose I feel I noticed more fixed rate advertising...ie when lenders knew that this was a safer time to sell this product at their premium .

Just my thought but as above it would be very very iteresting to here some numbers of how things would be panning out for someone like this.

Not true.

Mortgage rate sheets always quoted the full suite of products.

newspapers always quoted fixed rates [along with all the rest] in their business section - even in the good old low rate days.