People always have and always will wonder and speculate about the future. We like to make predictions of what might happen so that we can look back and say ‘I told you so’. Oddly, in the last few years more than ever we seem to be doing this, even though in these last few years we have gone through unchartered territory in economic terms, which has even the best of experts scratching their heads.
The truth is, nobody knows. Most of the country, including myself, said that interest rates can’t go any lower, until recently there has been talk of them being cut by another 0.25% and we realised, yes they can. If you had asked most people to make their predictions for the forthcoming year on new year’s day 2007, ‘08, ‘09, ‘10 they would probably have been way off the mark.
There’s no harm in guessing if you’re discussing it with your friends or workmates, but when it comes down to something like your investments or mortgage, the consequences could be dire.
From an investment point of view, you may think a company is a dead cert to do well these next few years, but you shouldn’t use all your savings to buy shares in that company however strong your opinion is. Maybe you could include that company in your investment portfolio, but making predictions like that isn’t what investment is about for most people.
The same applies with your mortgage, you could be sure that interest rates weren’t going to move for the next twenty years, but if you really can’t afford to see interest rates rise, it isn’t worth the gamble. When your picking your mortgage deal, you need to think about what’s right for you.
I have recently taken out a new mortgage, and although my gut feeling is that interest rates probably won’t move much in the near future, I would rather pay more now for a fixed rate than take a gamble. I don’t want to come to work once a month waiting for the Monetary Policy Committee to make their announcement on what their view on interest rates are, and whether their decision will mean I have to get a paper round and start eating beans on toast a lot more so that I can make sure the bills get paid.
Imagine if you’re buying a house with a partner and you tell them that you are positive interest rates aren’t going to go up and you end up taking out a tracker rate mortgage. It will be great if you get it right, maybe you will get a pat on the back or a ‘well done’ at best. But what if you get it wrong? Some of us would get a few nights on the couch, and some of us would be sleeping in a tent in the back garden for the rest of our lives.
Making predictions are ok when it’s the odd pound on the lottery numbers or picking our favourite on the X-Factor, but when your mortgage and your home at risk, sometimes you need to put what you think to one side and decide what’s right for you. We recommend you speak to an independent mortgage adviser so that together you can decide what matters most to you and find you the mortgage you need. Kieron Bassett Financial Services has two Independent Financial Advisers. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Jason Hinde DipPFS
3rd October 2011
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