Mortgage help wanted

[Psycho Sonny]

House prices have been tumbling for a while in Oxfordshire, we have been keenly looking at the market for a while with a view to perhaps do one more move. Across the board we are seeing asking prices tumble by hundreds of thousands. (Clearly this also means that the house which we will sell has probably also lost a 6 figure amount, but moot when up sizing) Price points obviously a lot more than £450k but its certainly happening. Sub 450-500 i cant see the market moving downward much, the basic need for housing doesnt change.

Yeah it's the higher end market which will be effected the most which is why I said anything above £450K. Everything below that will still have too much demand and will keep prices steady.

People who will be staying put and losing money won't be able to stomach interest rate rises I can only see them staying low or going down again. Which is why a 2 or 3 year fix IMO is the best option.

 

[Mercenary Keyboard Warrior]

There will be impact across the range of prices, there always is. The ones higher up the ladder tend to be be hit harder, but it will happen all over if/when a crash comes.

The basic principles work the same way. Houses fall a bit, some people will try to move (those with secure jobs etc) and will be ok. The majority will go into wait it out and see what happens mode. This the means the market is slow, house builders will cut back and trigger more problems in this sector. Chains will fail as people have to withdraw, lost job, mortgage offers expiring etc.
Meanwhile people will lose jobs, they will start panicking and looking to sell, with low churn in the market they will be willing to lose more money in order to sell and not end up repossessed. They may manage to sell up, but they will mainly go to the very well off, outright cash buyers, or people relocating and having the issues fixed by employers. Whether BTL will help this time is less likely than in the financial crash, due to changes in taxation for this sector. Repossessions will happen and people will start holding out for one (I remember when buying my first it was the thing to do, keep an eye out at the start of the month when the repo's were listed.)

During the financial crash it was difficult to borrow unless you already had a good amount of equity. If you didn't you couldn't borrow. Whether if we have another crash the lenders again restrict borrowing a lot is unknown.
As the crash was fairly short lived the cycle didn't manage to get too embedded, and prices bounced back pretty quickly. If the next time we crash its more like historical ones we will potentially see more of the normal cycle.

In regards term of fixed and whether you should its all about personal views on risk and your personal situation. The higher the amount of your mortgage as a proportion of earnings the more a medium/long term fix may suit you as it gives certainty.
The lower the repayments the more scope you have for gain by playing the market frequently. You should also consider what if you lost your job, what sort of salary hit are you likely to take in order to secure a new position. If its negligable then great, but what if its say 20%, or you need to incur extra costs to commute.
Rates will rise, its all a gamble on when. We are worse placed than the US when their rises started, but look how quickly they went up when they did.
When rates are really low they need to move a fair bit to have any real effect on people spending. Its more the threat of the rate rise (dampening appetite to spend due to fear) than the actual technical rate rises that have the impact. Often those least willing to spend are impacted most (not the target demographic of the rate rise), and those most able to spend (savings, high net worth etc) that will actually benefit from a rate rise and actually be able to spend more.

 

[Semple]

Product fees generally only make sense to those borrowing a minimum of £300k.

Couldn't quite see where a product fee made it beneficial even at borrowing 300k.

I do wonder if anyone takes out a mortgage with a product fee. When i did some quick sums on 5-yr-fixed mortgages, paying the product fee up-front (never add to the mortgage), it worked out around a net saving of £4-£5 a month. If you stuck that 1k into a fixed term saver for 5 years, it would reduce the net savings to about £2 a month.Which hardly makes it worth even contemplating.

 

[Mercenary Keyboard Warrior]

Product fees and their benefit are in effect an equation not a simple £x its worth it, but below its not.

The fee itself (ie how much is it).
The term, the longer the term the larger the impact could be by not paying it. Effectively you should discount the cashflow impacts over the term.
The rate differential between the one with a fee and the best alternative without.

 

[Jez]

I do wonder if anyone takes out a mortgage with a product fee. .

He is about right, Santander right now example best rates are 1.49% over 24 months with a £999 fee, or 1.79% with £0 fee. Plugging £500k into it for example gives a "saving" over the 24 months of £1728, so a saving of £729 over 24 months by taking the fee. Plugging 300k in gives a net difference as above at £33 saving. So there is roughly your break even point. Anyone borrowing north of £300k makes a saving, the more you borrow the more the fee makes sense.

 

[Psycho Sonny]

It was obviously a rough guesstimate as all fees, rates and terms are different.

But the OP is borrowing £90k far off the £300k breakeven point so it was to tell him considering paying a fee would be madness.

At minimum he would need to be borrowing £300k

 

[Mercenary Keyboard Warrior]

Just had a quick play with Nationwide, used £200k net borrowing (vs £300k property to get decent LTV). Interesting result as they seem to have pretty much equalised around this point.
The fee is the same for all fixed at £999, 2 3 5 or 10 years
Term, amount payable with fee, amount payable without, difference, rates with, without
2, £23,361, £24,259, £898, 1.59%, 1.99%
3, £35,711, £36,731, £1020, 1.79%, 2.09%
5, £60,648, £61,791, £1143, 1.99%, 2.19%
10, £129,409, £130,593, £1184, 2.69%, 2.79%

Playing again the rough amount needed to hit the point of the fee equaling the saving over the term.
2 year, £225k
3 year, £195k
5 year, £175k
10 year, £170k

 

[Syla5]

Paying a product fee or not is not even close to as simple as Psycho Sonny's "only morons pay product fees" bs.

You need to evaluate the cost benefit of the process, do you want to change lender to get a product of the same rate with no product fee, or better rate with comparable product fee.

Is the product with the fee more cost effective over the term, i.e. is the reduced rate often associated to products with a fee cheaper over the 5 year period then the product without?

Does the product fee include solicitor's fees that are not included on a fee free product or not?


Ultimately the 2 options you have provided will see you end with the same outstanding capital at the end of the term, as long as overpayments are automatically allocated to capital reduction.

 

[mr griffin]

Ok thanks guys for your input.

Think I've found the best deal for me, as advised in the thread. Big thanks.

Hsbc are offering 5 year fixed deal with no product fee for 1.99% with leaving mortage at 20 years payments are £450 a month plus then adding overpayment of £250 a month according to mortage calculator it will knock 8 years and 1 month off the term of my mortage and give me plenty of flexibility if my circumstances ever change.

Thanks again for the advice, it's saved me a few quid and made me look into it a little more than I probably normally would

I've got a mortgage adviser coming round too see if they can beat it, but they probably wont Im guessing, but it's worth a punt before I go with hsbc

 

[martin363]

Ok thanks guys for your input.

Think I've found the best deal for me, as advised in the thread. Big thanks.

Hsbc are offering 5 year fixed deal with no product fee for 1.99% with leaving mortage at 20 years payments are £450 a month plus then adding overpayment of £250 a month according to mortage calculator it will knock 8 years and 1 month off the term of my mortage and give me plenty of flexibility if my circumstances ever change.

Thanks again for the advice, it's saved me a few quid and made me look into it a little more than I probably normally would

I've got a mortgage adviser coming round too see if they can beat it, but they probably wont Im guessing, but it's worth a punt before I go with hsbc

All my mortgages have been with HSBC and I found them to be fantastic and fair to be honest. I am lucky, paid off my last mortgage on the 4th April, and HSBC were genuinely delighted for me and made the process swift ands painless.

I recommend them as a fair lender.

 

[The_Abyss]

Before remortgaging to buy another place my last mortgage was with Nationwide. We overpaid it pretty much since month one, and paid it off several years early. When it became apparent that we were close, we stopped the overpayments and allowed the last two months to carry on with the standard direct debit, thinking that Nationwide would take care of things.

I didn't expect a fanfare or chocolates in the post, but not only did they fail to acknowledge the end of the mortgage (I think repaying a mortgage normally is a pretty big deal in most people's lives) but they actually continued to take the direct debit for the next two months before we queried it, and then took a further two months to refund the money!