Fixed or Variable Mortgage - What Should I Get? 

I haven't even watched the video yet but I've given it a thumbs up, simply for placing the answer in the thumbnail and never dragging out your videos with filler just to make it unnecessarily longer like many other RU-vidrs. Simply, you are appreciated!👍

Having lived through Thatcherism and 15+% mortgages I chose to buy my house with a string of fixed rate mortgages at circa 5% . So happy I did, very little stress and yes I may have paid a few pounds over at times but the peace of mind and ability to budget relatively predictably was priceless.

One the main reasons that inflation is so high is because of low value of the currency so to stop imported inflation the interest rate will need to stay higher than USA

This is certainly interesting, but I think that a variable rate is still a massive gamble. The logic presented for a variable rate makes sense however it takes in to account none of the unpredictable geo political events that may happen. The world is experiencing high levels of volatility and the chance that further unexpected events occur is very high. Even if you're right and interest rates drop, they will increase first and may take several years to drop below where they are now. I think fixing is the best option.

Don’t trust banks, don’t trust predictions, don’t gamble. This is what my mind suggests. Maybe out of fear but better be safe than sorry.

Love this video and you explain economics so simply ❣❣

Really great, specific video topic. The question in everyone's head. My instinct too.

I did the same 2-year fix in 2021 so face the same problem later this year. Although seeing some fixed-term savings accounts offering higher returns than some fixed-term mortgages, maybe it's not all bad.

Looking forward to another video. Hope you get time to put on some more content xx

Unfortunately interest rates are high - however this will not stop it because overspending isn’t the cause of inflation. Sickening govt behaviour

Very good video and well explained. Subscribed.

Rarely rewatch a video. Thank you.

I locked in again just a few days into the 6 months window of locking into a new fixed term. I'll be paying £180 a month more than I'm paying now but it's still less than paid in rent 8 years ago, yeah it's rubbish to be paying more but gambling on it when there's so many variables doesn't make sense to me.

The main driver of inflation is the £950bn QE. This is 'baked-in'. Energy had some effect but inflation was already at 8% and climbing when gas dramatically increased in price. The world economy has run too much debt. There is not enough wealth production to service this debt. Economic parameters are heading back to 'normal' in an attempt to save the situation. Interest rates will continue climb. Ignore the BoE, in 50 years there predictions have been rubbish. Not only bank rates play a part, but mortgages are really based on swap rates, the rates at which banks lend to each other, and they are on the climb. And will continue to do so because the banks are becoming very unstable. World economies are in an over indebted mess, and we will pay the price. Mortgage rates will continue to climb and will be high for a number of years. Recessions have yet to kick-in, but will and unemployment will be a big problem. You don't QE debt for 14 years with zero bank rate and expect to get away with it. It goes without saying that house prices will collapse. This will be my fourth crash since a buyer/owner, so I have seen it all before. Once interest rates are well above 5%, they will eventually fall in years to come but only back to the historical norm say between 5 and 7%. As normal economic parameters take back control the 5-7% will be needed to allow the system to work. For example, the pension schemes need 5%. We only have interest rates of 0-5% when we have QE to service them and that causes inflation, so it can't happen again. Your 6 reasons seem to ignore the chronic state of banks and economies. They are just 'nibbling' around the edges and not getting to the root of the problem The other point of interest are fixed rate mortgages. I don't believe these were designed to cater for these major interest swings, but made life more convenient when relative small swings occurred. House prices will collapse, and their combined value will fall below the value of the funds lent by the big lenders. That is, the loans will not be covered by the property value. This may cause the lenders' share prices to fall, and they go bust. It has happened before in 2008. In fact, that bank failures this time are already greater than in 2008, and there are more to come. The mortgage bundles will be sold on and all the mortgages will revert to standard rate which could be well above the rates now. The future does not look pretty. It is certainly very uncertain. Personally, and this is not financial advice, I would not be taking on any debt at present. As things get worse, the adverse effect of debt will be greatly amplified. The system is telling us that present house prices are way above intrinsic value, and the mechanism to drive prices back to reality will be painful. I think very few people have any idea what the future holds for us economically. 2023 will be an 'interesting' year.

Thanks, Tejvan - if aggregate demand (possibly the components of consumption and investment) is low, contributing to low growth, then why are BofE central bank interest rate rises designed to address inflation when there is little demand pull inflation from rising AD?. Consumers are not necessarily buying more or less food or fuel given the general price inelastic nature of these necessities. Certainly, the rise in interest rates has not made my Sunday roast cheaper so where's the plan? The interest rate rise has squeezed any disposable income out of the economy and recapitalised the banks with additional passive income from mortgage payments (and associated rent rises) who then pass it on to the rich with higher dividends (Nationwide Building Society is going to put an extra £100 in my account in June) but that isn't going to add significantly to more demand. If you consider the underlying wholesale cost of energy feeding into transport costs, then the inflation is mainly cost push with many monopoly firms then passing on these costs with higher retail prices or price gouging markets to exploit their monopoly and monopsony power - the blunt little tool of interest rates isn't going to impact these monopolists/oligopolists like the supermarkets and petrol retailers. The government isn't going to approach inflation from a tightening of fiscal policy with higher tax rises, so this shows how limiting Central Banks' monetary policy can be in using higher interest rates in the global economy.

A few Food staples might eventually drop a few Pennies, British Supermarkets will continue gouging customers with baked-in supplier inflationary price increases & additional price increases using their old "it's inflation" excuse.

Your gamble won't go well this year, I can see a couple of rises still to come this year due to persistent high inflation.

I like your explainations.

Loved my tracker mortgage around 1.5% for a few years and now time for bill shock as my monthly repayments are doubling

I would go fixed. I recommend watching 99 homes (film with Andrew Garfield). This film alone taught me that risking the house and your equity in it is not worth saving a few ££. When I was looking, I went for a 10, the extra £50 a month over the 5 or 2, I saw as stability insurance. The film highlights the dire positions people were put in when they could no longer afford the payments. I was seriously close to going for Habitos 35 year fixed mortgage, but settled with the 10.

I agree about this hasn't been demand driven inflation. In fact this inflation is a supply side issue. If a country isn't building enough homes it makes perfect sense for home values to increase. The higher value will at some point cause more building and local governments allowing higher density. Same for oil and gas.We're running low on the easy to get and refine. Add in a little global instability and oil and gas suddenly becomes hard to get and prices should go up. Everytime oil and gas goes up we start looking at alternatives.

I think the logic is pretty simple, the historical average interest rate is about 4%, so if you can lock in below or at that average rate of interest for as long as possible its probably a good idea. it is a great way to hedge your bets, you get the security of being protected from future spikes in interest rates and the worst case scenario is that you end up paying the average for it.

Really appreciate this channel contents. I understand the following are generalist questions, as each mortgage and each mortgage provider, maybe different within its terms... 1) What is maximum monthly 'over-payment' you can pay on a mortgage, to cut the time left to pay? (x3, x4) 2) If over-paying monthly, is it required that the final 3 months of a normal mortgage amount is paid at the very end, to clear the mortgage, so you avoid any mortgage penalty for paying off the mortgage early? (Instead of over-paying up to the final amount on the final months payment)

Can we have negative inflation in the midterm?

You should only fix if you want to protect against future rate rises.

very strong to put your money where your mouth is. im just to take a mortgage and will likely pick security over the gamble!

Inflation figures for next month were pretty bad - worse than Bank of England forecast, so this ended up being bad timing. Still 2 years is a long time!. This is latest on house prices. ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-TC3hG-hm5FA.html

I agree with everything but i think youve underestimated the goverments willingness to accidentally plunge us into recession by over egging the interest rates to save their egos

Interest rates will NOT fall in 2023 in any country in the anglosphere. If i was to bet, i would be on the side of IR being stable at best. Inflation hasnt been tamed at all, house prices are even rising in some cities like Sydney, interest rates hurt the 1/3 of the population who have huge mortgages or even less, but inflation kind of hurts everyone. So based on my analysis, i am huying a house here in NZ, and i will fix for at least one year, pay as much as i can afford while ir are this high, along with a good deposit and hope for rates to start easing mid next year.

I was going to fix my 1 mortgage not due in 2027 but have a feeling it will fall over time as it is unaffordable for many and inflation will go down.

A year ago, even six months ago it would have probably been wise to lock in a fixed-rate mortgage. I have told everyone I know for quite a few years to consider fixed-rate mortgages but I think most if not all of them did not listen and I know some of them are really feeling the pinch right now. Right now a variable rate would probably be the better option however I think high inflation could still persist for some time. If the FED says inflation is only going to be "transitory" you know it is going to be persistent for some time! For first-time buyers it is probably wise to wait for 12, 18, maybe even 24 months as it is far too risky right now and we could see further falls in real estate prices. For FTBs renting is the best option right now.

The expansion of the money supply causes inflation. Forget about the BOE base rate and focus on the bond market. Mortgage rates are more reflected there. The western central banks have been collectively printing like mad, so the value of their currencies are plummeting. You will only see this versus commodities. The countries with the commodities are no longer prepared to sell them for the devalued dollars, so they will take steps to ensure they price in inflation quite rightly. Higher interest rates are here for a while, early 2025 unless the central banks decide to increase money printing to buy bonds lowering their yield.

What about Phillips curve? Low unemployment = high inflation.

When talking about the Bank of England we are looking at the B team.God help us !

All these arguements from need are the same. The BoE wont do this to home owners long term. It all hinges on the BoE being able to sell all these bonds which doesn't seem to be the decision of any particular technocrat at Threadneedle

No disrespect but you didn’t see interest rates rising with all of the inflationary stimulus money printing governments done during the pandemic? The money supply according to most reliable sources nearly doubled during the lockdown periods! I’m an amateur self learned economics student and even I knew it would be best to lock into a decent low fixed interest rate mortgage for 5 years during this period.

I have fixed 5 yr mortgage 2.09 2.49 and 2.79 . It is a bad idea????😂

Very sound analysis, just one flaw. Why did stop INVESTING money on bicycles??? :D

4:01 the Bank of England never said that the country was suffering from price wage spiral. How about you actually go and watch his talk wage growth has remained flat during this inflationary period.

The monthly inflation figures are known and it is clear that inflation will fall over the summer as the high rises of last summer drop out of the rate. BOE needlessly raised rates. They will come down on their own and the rise in interest rates hit the economy. It is madness to go for a fixed rate when we are on a high and set to go down.. There is some merit in going fixed when rates are very low.

I just read the thumbnail. This video probably didn’t age well

35 grand for an extension , that was a deal 😉🍾

Doesn’t even make sense why you would only take out a two year when it’s ultra low. Firstly, renewing is time consuming Secondly, the product fee of a renewal is usually more than the difference between the interests of a lower 2 year compatible to a 5 year.

Why are you gambling with your mortgage? This is not UK inflation. This is global inflation. Nothing the bank does has any effect on global oil prices, global food prices or global goods prices. There are supply chain shortages and we are competing with the whole world for goods and services. This is driving up prices. Just because we can't afford something, doesn't mean the Americans who earn double what we do, won't continue to bid up the prices of everything.

Great video as always. I think a lot will depend on the incoming - fingers crossed - Labour government and their economic decisions. We will probably see public sector wages increase significantly, to be more in line with rises in the private sector. There could also be much more significant capital expenditure on infrastructure, and an encouragement to build new houses. As a result, the bank could be forced to keep rates around 3% or slightly higher, to ensure the economy doesn't catch fire. Personally I do think a long term interest rate of 3% is the sweet spot, as it gives those fortunate enough to have any spare money the chance to get some interest on their savings. Any higher then the rich and elderly will continue to hoard money and stifle growth. More importantly, if there is dramatically increased house building, combined with a realistic interest rate for hopefully cheaper priced property, we could see a moderate improvement in the economic well being of this nation. The structural damage done by Brexit however will take a generation to repair and the danger is that there isn't yet the political will to make the radical decisions necessary.

Variable is always better as it has no pre-payment penalty. You can switch anytime you want. I always opt for tracker rates.

Lol just because you say at the very end of the video "this is not financial advice" it doesn't mean people won't see it that way. If people opt for a tracker and rates continue to rise, you realise they could sue you right?

6% bank rate was part of the 2022 BoE annual stress test (amongst many other doomsday metrics). I also believe interest rates will begin to fall in 2024. Base rate will ultimately settle at ~2.5% If it doesn't then the UK economy and the UK housing market are toast.

None. Time to rent or move out to Africa. Cheaper life. An English friend of mine just reallocated to Tangier, Morocco 🇲🇦 life is 35% cheaper than London, he said.

Stagflation the British disease

This is terrible advice.