Mortgage rates in the future

I hope it works out for you, Paul.

For years people have been moaning about banks having too high a threshold for mortgages and saying if someone can pay higher rent, then why can’t they pay a lower mortgage.

Well, I think this is the wake-up call. When interest rates go up it’s a different ball-game. Suddenly renting don’t seem so bad anymore.

Jules wrote:

Oh yeah, because rent prices won’t go up, I’m sure…..

Difference is, it’s not really the same kind of commitment. Once you come to the end of the contract you can get out of there. With a house you’ve paid a massive upfront deposit which you now stand to lose – home repossession is a nasty business!

It is really difficult to know what will happen with mortgage rates at any time but particularly now. Without a crystal ball no one knows what mortgage rates will be next year or the year after.

However, if I were you I would prepare for the worst and start putting money aside from now on each month, if you can, so that when you need to switch mortgage you will have some cash to fall back on. Of course, if you’re able to pay off a lump of the mortgage when you come to remortgage you will have less to pay off so, even if rates have gone up, you won’t have to pay so much extra each month as you will be paying off a lower principle.

Do be aware, too, that if things are really tough for you when you come to remortgage, you could still extend the term of your loan (depending on your age). So even if you have been paying it for five years, say, you don’t have to go for a 20-year repayment term. You could potentially have another 25-year one which would mean you would pay less per month. It’s not ideal. the better way is to pay it off quicker rather than over a longer term, but if things are really tough it’s one way of keeping costs down in the short-term.