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Opinions sought on LIBOR mortgages: is now a good time to get one?

Anyone care to comment on whether now would be a good time to take out a Libor mortgage?

The one I have seen is at the Skipton BS and is LIBOR plus 2.00 % for

7 years.

I ask because the advantage of this loan is based on the interest rates in the States being lower than here by over the period. The current benefit to me would be lost if the gap of 2% closed: either US rates went up 2%, they came down by 2% in the UK, or a similar net movement in both directions.

I note a couple of things

- US interest rates went up last week

- they may well go up again in December by a similar amount if US growth continues

- UK rates could well fall if the perception is that the housing market has been suitably deflated

Obviously, I know that the answers to these questions are imponderables. But I would welcome your opinion and rationale for arguing either way.

Cheers, Lex

Reply to
Lex
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In message , Lex writes

This mortgage is US 3mnth LIBOR +2% (I think)

Check the early redemption penalty. If £- $ interest rates converge, can you get out quick enough without suffering a penalty of more than the benefit you have earned to date?

If the Skipton mortgage will allow you to 'overpay' then try overpaying the amount you are saving per month. Then if interest rates converge and you switch into a £ based interest rate, at least you will owe less.

Reply to
john boyle

thanks for the comments John, you are right

the short answer is no - they are about 5% of the loan for the first 4 years, 4% for the next two and 3% after that

they don't allow you to overpay

...Hence my question about where people think the interest rates may move to. I would be better off right now and would remain 'up' as long as the gap between £-$ rates don't converge. When do people think that might happen...?

Lex

Reply to
Lex

Backtesting this over the last ten years shows that on a 100,000 loan you'd have saved about 5,000 in interest using the Skipton product. Most of that saving would have been over the last three years. Prior to that you'd have gently been on the wrong end.

But what of the future?

Rob Graham

Reply to
Robin Graham

Backtesting this over the last ten years shows that on a 100,000 loan you'd have saved about 5,000 in interest using the Skipton product. Most of that saving would have been over the last three years. Prior to that you'd have gently been on the wrong end.

But what of the future?

Rob Graham

Reply to
Robin Graham

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