1.5% Happy Days

[jamesterror]

I know my parents had a fixed rate until a year or two ago, now they are still paying at the rate of 5% or a bit more, but as they say the sooner its paid off the better.

...will it kick start the housing market though?? Lenders are being so difficult about lending, I come up against this all the time with clients wanting to buy - not just a home, but often on businesses as well - and can't get finance.

In fact I have about 5 or 6 business clients who want to sell - at realistic prices and for good reasons not related to the economy - typically retirement, or helping to fund grandchildren's school fees - but the buyers can't get a loan, and I've probably over 100 HIPs where the properties aren't selling. If they all sold, I'd need 3 or 4 more people to cope with the work.

Ho hum, we wait for better times

the rate cut isnt being passed on as much as it should, so if youre in a fixed rate in the 5% area youre not much different to many current variable rates. its trackers which are really saving

[jamesterror]

Originally Posted by jamesrichardson

the rate cut isnt being passed on as much as it should, so if youre in a fixed rate in the 5% area youre not much different to many current variable rates. its trackers which are really saving

I wonder what my savings will be earning...

Originally Posted by jamesterror

I wonder what my savings will be earning...

im sure the banks are not going delay passing any rate cuts onto savings accounts

It's unlikely to kick start the housing market, because, like Ed said, Banks aren't lending.

They're in the unenviable position of being told to be sensible about how much and who they lend to on one hand (that is what got us here in the first place, irresponsible lending) and on the other hand being told to pass on full interest rate cuts and lend money.

It can't work both ways.

[jamesterror]

Originally Posted by jamesrichardson

im sure the banks are not going delay passing any rate cuts onto savings accounts

They'd have been slashed as soon as it was accounced really.

Contemplating whether its actually worth 1.5% though, luckily I'm a low income earner / student so don't have to pay tax on it.

...unless your mortgage provider has a collar on your rate (http://www.fool.co.uk/news/your-mone...mfoleml0010038) the current drop was so unlikely that most people didn't even consider a 2% (or even 3%) collar as a factor when choosing a mortgage.

With regard to the usual tracker/fixed rate debate. Putting the existing (abnormal) drop to one side for a moment, it can be summarised as this:

Unless you're clever enough to be able to accurately predict what the base rate will do and lucky enough that your mortgage renewal falls at the right time, every time it makes sense to switch, you will generally be better off over the life of the mortgage by selecting a variable rate. Only if you are stretching yourself and cannot afford it to go up, is it worth getting a fixed rate.

Of course, if you play the stats of your risk in all fields (including how you buy insurance, etc.) it makes most sense to opt for the variable rate, but overpay your mortgage* by the difference between the fixed rate and the variable one. During the times when all goes well, you'll pay off more of the mortgage sooner. During the times when it goes wrong and you end up paying more than a fixed rate, you'll be able to drop the amount of your payments or even take a payment holdiay (because you've overpayed)**.

*assuming there's no penalty to do so for this amount.
**again assuming your mortgage allows you to do this.

If for whatever reason your mortgage provider doesn't provide the ability to do either/both of these things, just whack the surplus money in a high interest savings account and use that to bail yourself out during the bad times.

Originally Posted by timwilky

I did that with the fall from 14% to 11% in the 80s and paid off my mortgage 6 years early.

Boy you lot who moan about interest rates should have been around when we had governments who thought the way to solve recessions was not to spend money you don't have and huge rates, now we spend huge amounts we don't have and those trying to live on savings are getting badly hurt.

ok but you try having to have tripple the mortgage because of the increase in house prices!

It doesnt work any way as if you re mortgage at this moment you wont find mortgages with a 3% rate... the best are still roughly 6%!

It depends if your mortgage lender reduces their rates or not. We've still got 1 year left on our fixed term but our mortgage was taken out based on the property being worth 160k. It's now worth much less meaning when we remortgage we'll be screwed. Great.