Mark Dalton

Like most people who haven’t won the lottery I have the pleasure of buying my home via a mortgage. well for last few years I have taken out a “fixed rate” mortgage. Well as most of you will know the economy has gone to the dog’s and the interest rate has followed. The great thing with a “fixed rate” mortgage is that if the interest rate goes up your payments are “fixed” at the rate agreed, the problem is that if rates fall your payments also stay at the rate agreed.

Like most investments you have to study the market but eventually there is a little gamble involved. This gamble is usually based on sound research but it’s still a gamble. A “fixed rate” mortgage is in essence a gamble against interest rates going up.

Now one thing that nobody ever really predicts is the economy going into recession, and if they do they rarely tell anybody. The first thing the controlling bank normally does in this case is to reduce interest rates and that is exactly what has happened, to the point that the current interest rate is 0.5%.

Now when a “fixed rate” mortgage comes to the end of its agreed period it automatically reverts to what’s known as the “standard variable rate“. This is usually fixed at an amount, usually 0.25% above the base rate. So with a base rate of 0.5% you would expect the “standard variable rate” to be 0.75%. So to say I was somewhat surprised to receive a letter from my mortgage company when my “fixed rate” mortgage ended and they advised me that I would now be subject to there “standard variable rate” of 3.5%.

What? Well as it turns out that the biggest losers of this recession are the banks. Yeah you know the ones we gave billions of pounds too. Well in order to help us out they aren’t passing on all of the cuts, well they have a business to run you see. While they are grateful for the money, without them we would be even worse off. So it wasn’t so much as a handout, it was a investment in our own futures. All that money they have taken in bonuses doesn’t count. You see that was just the right amount they needed to pay in order to ensure they recruited the right people. The people that landed us in this mess right? No not at all, that was our fault.

Any way, you get the idea. The sad fact is the change is actually saving me money on a monthly basis as my “fixed rate” was actually at a higher rate, but I can’t help but feel cheated.

I have spent most of today researching mortgages and the financial markets trying to figure out what I do next. Obviously paying less is a preference but I also have to consider how much longer this will last. More thoughts on the subject to come.