That's really high compared to Europe!
I just bought a new house with 2% on the interest-only part and 1.6% on the annuity part!
In the month after rates grew by about 0.5% though. Seems like we hit the bottom and are climbing very slowly.
I just bought a new house with 2% on the interest-only part and 1.6% on the annuity part!
In the month after rates grew by about 0.5% though. Seems like we hit the bottom and are climbing very slowly.
The mortgage we took out two years ago (2 year fix, ~60% LTV) had a introductory rate of 1.2%.
That falls back to 3.something variable in September. We'll probably look for another fixed but current 2yr fixed rates seem to be around 2.3% (plus a £1k application). That's an uncomfortable increase on a big loan.
What's interesting is the rates on bigger loans (eg 90% LTV) aren't much more (2.4%+application). That's not what I'd expect a bank to offer if they expected a bursting bubble.
It feels like there's a few signs now that the so-called "18-year property cycle" is due to be cut short this time around. I've only recently heard the idea so I'm not sure how it's real it is (outside of their circles that have a vested interested in the timeline it predicts). UK lenders seem to be now toughening lending rules rather than relaxing them as they were "supposed" to. Not sure it's a good time to invest or not!
Not sure why brokers didn't mention them to you. Perhaps they like to show people low headline rates, or perhaps they see longer initial terms as bad for the broking business?
I'd like to understand how people think about a longer-term fixed deals. How do you know where you'll be in more than 5 years? If you need to move don't you get hammered by the ERCs? Can you really rely on transferring products?
Habito One is an interesting product, that seems to be a lifetime fix (Which I have personally never seen before the UK but maybe it exists) with no ERC! Obviously the rate is less attractive but rates are still so low and I think you can offset as well.
1. Often if you move house they will let you transfer your mortgage (actually take out a similar product and avoid the refi costs).
2. If you win the lottery, or otherwise are in a situation to prepay your whole mortgage? Well you might care much less about the 5% early fees in that case.
3. You can prepay usually 10% a year, at their discretion, without any early fees. If you just become a fair bit richer than you expected, prepaying at this level will reduce the mortgage quite quickly.We will drop 0.4% once we get below 66% LTV or so. Also, ours is 20 years fixed. The variable or 5 year fixed was even lower still, around 1.5% at 100% LTV.
It's still ridiculously low, which is why we're happy to pay a bit more to get it fixed for 20 years.
So, obviously, US banks have to price more risk into their rates.
I got mine with about 1% interest two years ago and do almost 5% redemption, fixed almost over the whole time. Just 2 years or so left at the end.
I can’t speak for the rest of Europe. It’s a big place you know.
Renewing after 5 years will presumably get you whatever rate is then? Which might be much higher.
It's always better to get a fixed rate (for the life of the loan) mortgage. If rates go up, you're protected. If rates go down, you can refinance to cheaper rates.
There is no gamble, that's why it is almost a free lunch. If rates keep going down as last ~10 years, you're never locked in, you keep refinancing to a lower and lower rate. If rates go up, you stay put with a fixed rate that can't ever go up. You win both ways.
In the USA there is no penalty to pay off a loan and refinance (there might be exceptions but never seen one) so you can do it at any time as frequently as you like and keep ratcheting the rates down.
There's also not such a huge difference. Looking at zillow today, 30-year fixed shows 4.95% and a 7-year adjustable at 4.81%
When people in one market talk about their fixed rate mortgages adjusting rates, it sounds strange to people familiar with other markets, just reinforcing the “real estate is local” adage.
In France, for example, the standard mortgage is fixed rate, for the whole duration of the loan, which is usually 20 to 25 years.
https://www.bankofengland.co.uk/bank-overground/2020/why-are...
(In 2020, more than half of new mortgages were fixed for 5 years or more.)
Mortgages are (almost) always 30 years duration.
I don't know what country in Europe you can't get fixed rates but it's not the Netherlands, that I know for sure. (Also there really isn't a 'Europe' for these things, every country is different)
In the United States we don't call that "fixed". We call that an adjustable rate mortgage. For example, my mortgage is fixed at 3% for its entire 30 year term and can properly be called "fixed".
People in the United States are leery of ARMs after what happened during the mortgage crisis in 2006-2011 so proper labeling is more important.
I could also have picked 30 years for a 'real' fixed mortgage. It just gets a bit more expensive. But it's definitely possible to get 30 year fixed if you really want to, every bank offers it.
In the Netherlands an 'adjustable rate mortgage' means monthly, quarterly or yearly variable rates.
Canada is similar to the UK - you amortize (pay back) the loan over 25-30 years. However, your mortgage is either variable (interest rate floats over time) or fixed (interest rate does change), but the loans are only for 1 to 5 years. At the end, you either "renew" your mortgage with the same lender or you "refinance" entirely.
So you can have a "fixed" mortgage, but not for the entire amortization period. But you're correct, it's more similar to the ARM mortgages in the US (potentially fixed for 5-10 years, then floating after).