Contracting in a recession

[SueEllen]

Top advice. You can very easily get into the habit of "I've a huge income I can afford all these things" but if you end up benched that can start to hit very fast. Reducing your discretionary spend by the increases to your utility and mortgage bills for instance... and if you have a fixed mortgage deal don't be complacent, it's waiting to clobber you in a year or 2 or 3.

Or 5, 7 or 10...

An annual budget/financial review in your household is sensible anyway, you can be amazed how much you're spending.

As a minimum.

No seriously keep your finances under review at all times and keep an eye on the general economic news.

[PCTNN]

Top advice. You can very easily get into the habit of "I've a huge income I can afford all these things" but if you end up benched that can start to hit very fast. Reducing your discretionary spend by the increases to your utility and mortgage bills for instance... and if you have a fixed mortgage deal don't be complacent, it's waiting to clobber you in a year or 2 or 3.
An annual budget/financial review in your household is sensible anyway, you can be amazed how much you're spending.

I'd also advise: be cautious jumping contracts for something shiny and new if you have a solid renewal available... the risk of a brand new contract getting terminated before or just after you start is much higher.

Good advice.

Speaking of mortgages, what would you guys do if your fixed mortgage deal was coming to an end in the next 3-6 months? It's a given that the interest rate you'll find for your new deal will be higher than the one you're currently paying, but how long a deal would you choose? 2 years, 3 years max is my opinion as I don't think the recession will last longer than that so in 2-3 years time it may be good to not be stuck with today's rates.

Interested to hear other folks' opinion.

[SueEllen]

Good advice.

Speaking of mortgages, what would you guys do if your fixed mortgage deal was coming to an end in the next 3-6 months? It's a given that the interest rate you'll find for your new deal will be higher than the one you're currently paying, but how long a deal would you choose? 2 years, 3 years max is my opinion as I don't think the recession will last longer than that so in 2-3 years time it may be good to not be stuck with today's rates.

Interested to hear other folks' opinion.

Work out if you are likely to need to move house in the next 2, 3, 5, 7 and 10 years.

Then fix for as long as you can. Remember there is a risk that events mean you have to move so read the small print of whether you can port your mortgage to a new property etc.

I fixed for 5 years but I did it as soon as I could get a new deal which was in April.

[KinooOrKinog]

Good advice.

Speaking of mortgages, what would you guys do if your fixed mortgage deal was coming to an end in the next 3-6 months? It's a given that the interest rate you'll find for your new deal will be higher than the one you're currently paying, but how long a deal would you choose? 2 years, 3 years max is my opinion as I don't think the recession will last longer than that so in 2-3 years time it may be good to not be stuck with today's rates.

Interested to hear other folks' opinion.

I've just taken out a brand new mortgage after renting for eight months.
I was initially thinking along the same lines as you, but I spoke to two different mortgage advisors and their advice was that a longer fix is probably better. I would normally fix for two years but I've taken their advice and gone for the five year fix this time. Their view was that even if mortgage rates start to come down after two or three years, it's not going to be by much.

[WTFH]

Good advice.

Speaking of mortgages, what would you guys do if your fixed mortgage deal was coming to an end in the next 3-6 months? It's a given that the interest rate you'll find for your new deal will be higher than the one you're currently paying, but how long a deal would you choose? 2 years, 3 years max is my opinion as I don't think the recession will last longer than that so in 2-3 years time it may be good to not be stuck with today's rates.

Interested to hear other folks' opinion.

Questions:
1. How long do you have left to run on the mortgage (not the deal, but the term of the mortgage)
2. What's your current LTV
3. What sort of mortgage do you have (Repayment, interest only, offset, etc)
4. What rate are you currently on, and what is that lender showing as the rate you will be going on to?
5. What does your mortgage adviser say?

[DealorNoDeal]

Interest rates are expected to reach 3% later this year, and then start coming down next year.

However...

Back in 2008/9, the BoE said ultra low interest rates were just a temporary measure, and look how that turned out.

[SueEllen]

Sorry I should have said everywhere e.g. on all financial pages, forums, mortgage advisors, people have recognised that interest rates were some of the lowest they have historically been hence that's why they are recommending that you fix as long as you can. Though in theory you should have fixed for a long time around December but clearly that wasn't possible.

[ladymuck]

I'm a middle-aged renter and have just taken out a three year term, fixing my rent for that whole period. Fixing isn't just for mortgages...

[d000hg]

Or 5, 7 or 10...

True but not many have such long term fixed deals and on average, most people might be half-way through their deals anyway.

[d000hg]

Good advice.

Speaking of mortgages, what would you guys do if your fixed mortgage deal was coming to an end in the next 3-6 months? It's a given that the interest rate you'll find for your new deal will be higher than the one you're currently paying, but how long a deal would you choose? 2 years, 3 years max is my opinion as I don't think the recession will last longer than that so in 2-3 years time it may be good to not be stuck with today's rates.

Interested to hear other folks' opinion.

I would find an advisor and talk to them. It's easy to get sucked in to much longer fixed deals but sometimes the extra cost means that paying less for 2 years and more for the following 2 is still cheaper than a 4-year deal.

It's all a bit of a gamble and you pay for certainty. The disparity between 2/3/5/X year deals shows you what the banks think is going to happen, are you prepared to bet you know better?