Little bit of mortgage advice

Dr House

Dr House

Dr House

Soldato
Joined
17 Oct 2002
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Location
London
Our mortgage deal is up soon but I cant really make up my mind what to do.

Here are my choices

2 years tracker 2.39%
2 years Fixed 2.65%

5 years fixed 3.59%

I am leaning towards the 5 years fixed as it will offer us some security however at the moment it will cost us 165 pounds per month more then the 2 years fixed.

I expect the next 2 years to be quite tight for us however we should be able to pay it all off in 6 ish years.

So do the local ocuk finance experts think interest rates will go up anytime soon?
 
Personally I'd go with the 5 year fixed, so you know what your outgoings will be with regard to your mortgage for almost the entirety of its duration.

I have no idea which way the interest rates will go though, cos I is dim.
 
Im 50/50 between two, the tracker and the 5 year fixed

Tracker, good rate, can actually invest at a higher rate than that in an ISA and make more money than overpaying, plus the security that comes from having savings.

5 Year fixed, thats a damn good rate compared to our long term rates. This is the safe option for sure if money will be tight.

I would consider all them rates good however, there isnt really a bad one amongst them.

I think I would go 5 year, but only just, reasoning:
I think when interest rates do go up, probably (hopefully) towards the end of 2012 you need a 1.25% increase in base rates to mean in all likelyhood you will be paying less on the fixed.
I personally think you will see interest rates rise quite quickly when they do, people will have had quite a period of hard times and when the feel good factor returns I think you will see some serious inflation again, but this time consumer led price inflation rather than input price inflation. They will attempt to control that with interest rates.

Consider penalty clauses to get out of these deals. There is quite likely a nasty one on all of these but I suspect much worse on the 5 year fixed.
 
A couple of questions that need consideration:

-What are the fees associated with each mortgage? (including everything i.e. arrangement fee, valuation fee etc etc)
-What is your SVR?

Depending on what the SVR is and how much fees if any the lender wants to charge, it may be worth considering not taking out a new mortgage at all and just sitting tight.

If you do take out a fix I would steer clear of the 2 year fix. Rates are unlikely the move much over that time period, or if they do it will be towards the end meaning the 'average' or 'effective' rate over the whole period won't increase by much.

If I had to choose one of the fixed products you mention I would probably go for the 5 year fix, 3.59% is extremely low for a 5+ year fix by historical standards and it is not inconceivable that in the latter half of that term it could be looking very good value indeed if interest rates start to head north. The two year fix is cheaper but I'd expect the tracker to probably work out cheaper still.

Obviously when you start factoring in personal circumstances the picture changes slightly, if the next 2 years in particular are going to be tight then you maybe can't afford that extra £165/month going out and need to go for an option that is cheaper in the short term, taking the risk that you'll be OK in the long term.

Finally if you intend to pay off your mortgage within 6 years, yet the next 2 years are going to by tight, how about extending your mortgage term to longer than 6 years? Going for the 5 year fix over say an 8 year term might work out quite well (rough guess - you do the math!).
 
Thanks for everyones input on this.



-What are the fees associated with each mortgage? (including everything i.e. arrangement fee, valuation fee etc etc)
-What is your SVR?
Click to expand...

500 fee with each one. there is no valuation fee as we are only switching deals.

If I want to borrow more I can get it valued again but that costs 500 pounds.



If I had to choose one of the fixed products you mention I would probably go for the 5 year fix, 3.59% is extremely low for a 5+ year fix by historical standards and it is not inconceivable that in the latter half of that term it could be looking very good value indeed if interest rates start to head north. The two year fix is cheaper but I'd expect the tracker to probably work out cheaper still.

Obviously when you start factoring in personal circumstances the picture changes slightly, if the next 2 years in particular are going to be tight then you maybe can't afford that extra £165/month going out and need to go for an option that is cheaper in the short term, taking the risk that you'll be OK in the long term.

Finally if you intend to pay off your mortgage within 6 years, yet the next 2 years are going to by tight, how about extending your mortgage term to longer than 6 years? Going for the 5 year fix over say an 8 year term might work out quite well (rough guess - you do the math!).
Click to expand...

My worry was that if we take a 2 years fixed deal now that it will end just when the interest rates have gone up.

My wife's pay will jump 250 to 300% in 22 months time, so my hope is that between year 3 and 6 we would be able to save enough to get it paid off at the moment things are a little tight but If I am honest we could still manage if interest rates did go up to another 2 to 3%

I am taking a interest only mortgage so it does not make any difference how long the mortgage is over, I think its 20 years.


Burned_Alive said:
Where've you found 3.59% for 5 years fixed?
Click to expand...

RBS
if you are buying a new house they will even give you 250 quid cash back
http://www.rbs.co.uk/personal/mortgages/g2/view-product.ashx?id=fix8370




robskinner said:
Consider penalty clauses to get out of these deals. There is quite likely a nasty one on all of these but I suspect much worse on the 5 year fixed.
Click to expand...

5% first year falling by 1% each year.
 
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I have a question, say you see a house for £110k that you'd want to spend 30k on to add an extension, do banks just give you a 140k mortgage? I assume they'd need to see a business plan, stating how much it will be worth after the extension so that they don't end up in negative equity?

Also, planning, if you don't own the house, so can't do the planning, how do you get the mortgage? Do you just buy it at 110k and then re-mortgage? How doth it work?

Thanks in advance:)
 
Personally I'd go for the 5 year fixed, might end up costing you a bit more over the period but the certainty of being able to budget over 5 years especially at a very competitive rate would be very appealing to me. :)
 
I am hearing wispers the base rate is possibly going down to 0.5% - what I really mean is 0.25%!

We are on a tracker mortgage with the option to fix if needed. This is only on a 2 year deal.

I would go with the tracker, don't take my word for it but I don't think interest rates are going to go up any time soon. After the 2 years is up then look at the possibility of long term fixed.
 
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godinman said:
I have a question, say you see a house for £110k that you'd want to spend 30k on to add an extension, do banks just give you a 140k mortgage? I assume they'd need to see a business plan, stating how much it will be worth after the extension so that they don't end up in negative equity?

Also, planning, if you don't own the house, so can't do the planning, how do you get the mortgage? Do you just buy it at 110k and then re-mortgage? How doth it work?

Thanks in advance:)
Click to expand...

Good question!
 
GinG said:
I am hearing wispers the base rate is possibly going down to 0.5%.
Click to expand...

Meanwhile, in 2010...

OP - personally I would probably slide gracefully onto the standard variable rate, though you don't seem to have answered Hang Time's question about what that actually is (sorry if I missed it).

Mortgage companies seem desperate to entice people away from the SVMR with scare scenarios about rates reaching 500% in two months' time. Presumably they're making bugger all on SVR customers and need to get the arrangement fees rolling in.

Also there has been talk of the Bank of England rate falling to 0.25 or even zero % :eek:. If that happens your SVMR will obviously look even better.
 
I went for a Nationwide tracker... 5 years @ 0.5 base + 2.25 = 2.75%. No exit fee, and was only a £99 booking fee.

If I see the rates are about to shoot up for a prolonged period, I'll jump onto a fixed deal. But I think that is unlikely.

It all comes down to your personal situation and how much risk you want to take.
 
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I'd take the 5 year fixed, you have the security and peace of mind of knowing what you are going to need to pay.
 
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