Remortgage - First Direct a good choice?

[ChrisD.]

My fixed rate expires in April next year. House is circa £300k and current balance is £196k.

I am no financial expert but with Brexit happening I am keen to fix for 5 years. I don't think 2 years is long enough and 10 years is too long.

First Direct, who I bank with, have just given me an offer in principle for 2.25%, 5 years and unlimited overpayments. Not immediately, but around a year into the mortgage I intend to be paying twice as much as the minimum payment so not having a ceiling on overpayments is quite important.

I'm self employed, so I can't really go to the open market, the cheapest I have seen elsewhere is 2.05% with Metro bank (IFA found this) but there's a 20% ceiling, which I appreciate is a lot still. However I'm favouring First Direct as I bank with them. Am I being daft with any of my logic before I proceed?

 

[Deuteronomy]

I took a new mortgage with them last year when I moved house, 5 year fixed, also switched to banking with them too.
I really liked the fact I could just apply online and just upload any documents they wanted, and they didnt do the hard sell like I found when trying the traditional high street banks and building societies. Then there was just a phone call to confirm the details and that was it.

 

[Psycho Sonny]

go for a 2 year fix IMO.

reason being. with time you should fall into a lower LTV so if rates do rise. the lower LTV will make effectively get rid of any rise in rates. if they don't rise then your onto a winner. so it's a win/win situation.

IMO fixing for 5-10 years should only be done when a countries economy is booming or the outlook looks great. if anything Brexit will cause interest rates to decrease. probably into negative values to stop anyone from saving. since the recession we haven't seen any real increase.

also if there is a 20% ceiling you can just shorten the length of the mortgage to compensate.

the rates you are looking at look good.

 

[Syla5]

reason being. with time you should fall into a lower LTV so if rates do rise. the lower LTV will make effectively get rid of any rise in rates. if they don't rise then your onto a winner. so it's a win/win situation.

also if there is a 20% ceiling you can just shorten the length of the mortgage to compensate.

the rates you are looking at look good.

The OP is already at 65% LTV, getting a better LTV isn't really going to open up any better rates from here.

Good advice on shortening terms, although its a lot less straight forward to lengthen them again.

Yeap 2.25% isn't a bad rate, but there are better out on the market so it really depends on the product fee with First Direct. When I was shopping around I didn't find FD to be one of the better rate providers but they are good in terms of service so I did consider them for a time.

Rates as low as 1.8% can be found fixed for 5 years still, also OP is your house currently worth 300k or is that what you paid for it. Value now is what you need to consider when re-mortgaging not value when you last had it valued.

 

[ChrisD.]

Rates as low as 1.8% can be found fixed for 5 years still, also OP is your house currently worth 300k or is that what you paid for it. Value now is what you need to consider when re-mortgaging not value when you last had it valued.

I am self employed, so I can't use a lot of the cheaper lenders as they base their decision on salary alone (mine is £8k~ something) rather than day rate or ltd company net profit.

I paid £230k for it, £300k is going by what an estate agent told me a few months ago alongside similar properties currently for sale within a mile. Next doors' is a 4 bed detached like mine but is a bigger house and that is up for £320k.

There is no product fee, plus free valuation and legals.

 

[PiKe]

Try calling https://www.landc.co.uk/ they remortgaged my house and got a better than rate from my own bank than I could have otherwise.

 

[Syla5]

I am self employed, so I can't use a lot of the cheaper lenders as they base their decision on salary alone (mine is £8k~ something) rather than day rate or ltd company net profit.

I paid £230k for it, £300k is going by what an estate agent told me a few months ago alongside similar properties currently for sale within a mile. Next doors' is a 4 bed detached like mine but is a bigger house and that is up for £320k.

There is no product fee, plus free valuation and legals.

Then stick with first direct, as that deal isn't bad at all and saves a lot of hassle on the application process!

 

[ChrisD.]

Try calling https://www.landc.co.uk/ they remortgaged my house and got a better than rate from my own bank than I could have otherwise.

Thanks, I'll have a look this evening.

Then stick with first direct, as that deal isn't bad at all and saves a lot of hassle on the application process!

That's what I think I will do, I like the fact it's my own bank and I've been happy with their service, plus unlimited overpayments.

I'm just not sure on 5 or 2 years now.

 

[covenantuk]

It's worth mentioning that due to the way FD work out repayments on their offset mortgages, they tend to be higher than equivalent non-offset elsewhere. Not a deal breaker as long as you can afford a bit more than the usual mortgage calculators are telling you.

 

[touch]

The 20% overpayment limit is usually against the outstanding balance. So if you've got £198k outstanding, you can overpay £40k that year. Even doubling your monthly payments wouldn't get you anywhere near that.

 

[Simon]

Don’t they do a 3yr?

 

[Syla5]

The 20% overpayment limit is usually against the outstanding balance. So if you've got £198k outstanding, you can overpay £40k that year. Even doubling your monthly payments wouldn't get you anywhere near that.

It varies from lender to lender. My previous lender was 10% per annum of the outstanding balance from the anniversary date. My current lender is 10% per annum of the original loan amount.

OP my preference is fix long, I do, mainly because it gives me a full and clear plan of what needs to be paid for a longer period of time. My wife is also self employed and this gives us stability in case her earnings fluctuate to much.

2.25% is a good 5 year fix for no hassle, and no fee. Even if interest rates reduce, these fixed rates wont get a lot better.

 

[Bald-Eagle22]

With regards to figures only you really know what suits your pocket , you will have hundreds of different opinions .

In terms of FIRST Direct - my mortgage has been with them for the last 7 years and I wouldn’t dream of going with anyone else’s. I’m currently into year 2 of a 5 year fix at 1.94%. I also have my current accounts with them and you couldn’t pay me to move to someone else - they are literally that good.

Reasons for using them as a mortgage provider for me are 2 fold .

1. When you call them you have zero phone menus to negate and it’s always a friendly Yorkshireman/woman on the end of the phone.

2.The ability to just over pay what I like and when I like on line .

I wish they also did BTL as well as I wouod move to them in a heartbeat .

Hope that helps you

 

[ChrisD.]

Thanks, I'm pretty set on using FD, my bank is with them and they're a fantastic bank. I always knew I would choose a mortgage with them if offered, even if it's is a little bit more expensive than the competition.

Just have to work out how long to fix really, I plan on moving, but that's 2-4 years away, so I guess 5 would be fine and then just move the mortgage.

 

[Psycho Sonny]

Thanks, I'm pretty set on using FD, my bank is with them and they're a fantastic bank. I always knew I would choose a mortgage with them if offered, even if it's is a little bit more expensive than the competition.

Just have to work out how long to fix really, I plan on moving, but that's 2-4 years away, so I guess 5 would be fine and then just move the mortgage.

you should only fix long term if you think they will rise substantially.

there is no way I see them rising substantially ever again. house prices are too high in this country.

the only way i see them rising substantially is if minimum wage went up to £15 an hour.

i'm happy to be proven wrong i just cannot see anyone come out with a reason why they would go up.

the only reason they went up earlier this year was because they had been so low for 8 years. the lowest they have been for like 50 years. so there was only one way they could go. however they only went up by 0.25% and that was after several votes to ensure it was the right thing to do.

with Brexit looming I'm banking on them going the other way now. I see them decreasing to force people to spend rather than save. make loans more attractive to people. get them into debt, etc.

i bet you will be able to get a personal loan with a rate of 2% in 1-3 years time. mortgages will be down to 1.5%.

or after Brexit immigration stops into the UK completely. meaning no shortage of homes. which means house prices collapse. then new buyers can afford to pay higher interest.

that is a scenario i just don't see happening.

 

[Syla5]

you should only fix long term if you think they will rise substantially.

It is entirely down to preference, and while rates are low, fixing for a long time provides people with consistency over a long period. The cost of that consistency while rates are low is also much less then waiting to see if rates rise and then fixing for a long time.

Fixing for a long time also allows for longer more consistent overpayment planning and benefit gain.

In respect to your view on interest rates decreasing its an interesting one, but realistically they cannot go to much lower then they are now, 0.75% currently is already very low, and you haven't considered the fact that the current base rate already factors in a negative brexit effect.

As for the UK housing crisis being linked to immigration, you might be surprised to know it isn't.

 

[Kemik]

If you don't plan on moving, grab a 5 year fix as soon as possible. BOE have said they aim to increase rates by at least 1% over the next two to three years.

 

[Psycho Sonny]

It is entirely down to preference, and while rates are low, fixing for a long time provides people with consistency over a long period. The cost of that consistency while rates are low is also much less then waiting to see if rates rise and then fixing for a long time.

Fixing for a long time also allows for longer more consistent overpayment planning and benefit gain.

In respect to your view on interest rates decreasing its an interesting one, but realistically they cannot go to much lower then they are now, 0.75% currently is already very low, and you haven't considered the fact that the current base rate already factors in a negative brexit effect.

As for the UK housing crisis being linked to immigration, you might be surprised to know it isn't.

Go look at Japan's interest rate history.

And japan probably has a stronger economy than ours

 

[Syla5]

Japans economy is significantly differently structured then ours. Interest rates rising would have a much larger effect on their economy.

 

[Psycho Sonny]

The last rise wasn't really a rise either. It was a correction to the change they made after the brexit vote to help boost the economy.

2001 4
2002 4
2003 3.75
2004 4.75
2005 4.5
2006 5
2007 5.5
2008 2
2009 0.5
2010 0.5
2011 0.5
2012 0.5
2013 0.5
2014 0.5
2015 0.5
2016 0.25
2017 0.5

it's back to 0.5% what it was since 2009 so it wasn't a rise at all.

it's been so low for so long and it's still not helped the economy so i can't see them raising it. all it would do is make the banks richer and more dissent within the country. tories would be voted out or there would be riots as people have to choose between homes and eating.