Re-mortgage chocies?
Discussion
Our mortgage is up soon and the Mrs and I are weighing up our options. We got tied into a 5 year fixed in 2008 at what is now a relatively high rate. Anyhow were’ now in a position where we can knock 10 years off the term of our mortgage and not be paying a great deal more in terms of monthly payments.
We’ve only been looking at fixed rates and not sure whether to go for 2, 3, or 5 year. I know no one has a crystal ball to say where rates are going to go-although with the recent unemployment figures there may be some sort of back track from the governor of the BoE.
The 2 and 5 year deals are higher rates but not massively so, equates to an extra £40 per month so ~£2400 over the 2 year rate. I can’t see us ever moving out of our house so that’s not an issue, got plenty of equity in the house.
What would you do?
In my opinion, interest rates have only 1 way to go - UP.
With that in mind and the fact you are not moving so will not need to repay the product you take, I would be fixing for as long as possible whilst the differential between long and short fixes is relatively small.
Depending on your LTV, you can get a 5 year fix from 3% - no brainer really.
David
With that in mind and the fact you are not moving so will not need to repay the product you take, I would be fixing for as long as possible whilst the differential between long and short fixes is relatively small.
Depending on your LTV, you can get a 5 year fix from 3% - no brainer really.
David
sumo69 said:
In my opinion, interest rates have only 1 way to go - UP.
With that in mind and the fact you are not moving so will not need to repay the product you take, I would be fixing for as long as possible whilst the differential between long and short fixes is relatively small.
Depending on your LTV, you can get a 5 year fix from 3% - no brainer really.
David
This is my way of thinking, but the Mrs for some reason wants to go shorter. We’ve more than 60% LTV so can qualify for the best deals. Can’t see money being any cheaper than it is in terms of mortgage lending. I’d go for 10 years if I could, so long as I could make over payments. Mortgage free by 40 is the dream……With that in mind and the fact you are not moving so will not need to repay the product you take, I would be fixing for as long as possible whilst the differential between long and short fixes is relatively small.
Depending on your LTV, you can get a 5 year fix from 3% - no brainer really.
David
ETA The Mrs reason for going shorter term is if/when we have kids in the next couple of years if we find ourselves stretched we can get another deal. I’ll have to look at the particulars but I expect so long as you stick with the same provider they won’t mind adding years (and debt on for you). I’m not sure if it’s still the case but you can take out a second mortgage too but that’s more for equity release?
I’ve based the affordability on my wage only and it’s doable, I suspect she’ll work at least part time when kids do come along though.
Edited by a311 on Thursday 12th September 09:30
a311 said:
This is my way of thinking, but the Mrs for some reason wants to go shorter. We’ve more than 60% LTV so can qualify for the best deals. Can’t see money being any cheaper than it is in terms of mortgage lending. I’d go for 10 years if I could, so long as I could make over payments. Mortgage free by 40 is the dream……
You can go on a ten year rate if you want, I've just done one for a client at 3.89%........Have you considered an offset mortgage? Can overpay as much you like and access to the cash if you need it in case of emergency.
Disclaimer - Personal opinion only, I am not qualified to give financial advice!! I wouldn't bother fixing for only 2 years, all the talk coming out of the bank of England is indicating rates won't rise until 2015 at the earliest, so you would be paying fees etc for a fixed mortgage, but not really getting any benefit from it other than piece of mind.
Disclaimer - Personal opinion only, I am not qualified to give financial advice!! I wouldn't bother fixing for only 2 years, all the talk coming out of the bank of England is indicating rates won't rise until 2015 at the earliest, so you would be paying fees etc for a fixed mortgage, but not really getting any benefit from it other than piece of mind.
a311 said:
sumo69 said:
In my opinion, interest rates have only 1 way to go - UP.
With that in mind and the fact you are not moving so will not need to repay the product you take, I would be fixing for as long as possible whilst the differential between long and short fixes is relatively small.
Depending on your LTV, you can get a 5 year fix from 3% - no brainer really.
David
This is my way of thinking, but the Mrs for some reason wants to go shorter. We’ve more than 60% LTV so can qualify for the best deals. Can’t see money being any cheaper than it is in terms of mortgage lending. I’d go for 10 years if I could, so long as I could make over payments. Mortgage free by 40 is the dream……With that in mind and the fact you are not moving so will not need to repay the product you take, I would be fixing for as long as possible whilst the differential between long and short fixes is relatively small.
Depending on your LTV, you can get a 5 year fix from 3% - no brainer really.
David
ETA The Mrs reason for going shorter term is if/when we have kids in the next couple of years if we find ourselves stretched we can get another deal. I’ll have to look at the particulars but I expect so long as you stick with the same provider they won’t mind adding years (and debt on for you). I’m not sure if it’s still the case but you can take out a second mortgage too but that’s more for equity release?
I’ve based the affordability on my wage only and it’s doable, I suspect she’ll work at least part time when kids do come along though.
Edited by a311 on Thursday 12th September 09:30
The benefit would be seen at the end of the 5 year period where it is more likely interest rates will rise quicker. If you fix now there is a possibility you will come off into higher interest rates sooner if you leave it longer your five years will take you longer into that period as well as saving money for the first two years.
Sarnie said:
You can go on a ten year rate if you want, I've just done one for a client at 3.89%........
Who was the provider if you don’t mind me asking? Yorkshire and Chelsea seem to have some competitive rates at the moment for what we’re looking at. I’d not considered offset mortgages. The flexibility does appeal as we’re in a good place financially at the moment so could really ramp up the payments until any kiddies arrive. I understand you can also make over payments to some fixed rate products so really need to analyse the fine print, this is usually a lump sum so I guess it takes discipline to put the over payments in the bank without finding something else to spend it on……a311 said:
Who was the provider if you don’t mind me asking? Yorkshire and Chelsea seem to have some competitive rates at the moment for what we’re looking at. I’d not considered offset mortgages. The flexibility does appeal as we’re in a good place financially at the moment so could really ramp up the payments until any kiddies arrive. I understand you can also make over payments to some fixed rate products so really need to analyse the fine print, this is usually a lump sum so I guess it takes discipline to put the over payments in the bank without finding something else to spend it on……
Drop me a PM 
Personally, I'd be looking at some of the 10 year offerings while they are under 5%.
Rates are going up and sooner than the 3 yr time scale being mooted by the BofE.
Rates will also overshoot to reign in inflation. They always do. It's never not happened.
The first rises will be small, pre-predicted 25bp steps.
At a later date we will start getting 50bp jumps out of the blue to try and haul in spending.
Mortgage rates will get close to double digits over the next 5-10 years. Personally, I think they will go through and probably around the 7 year mark.
Anyway, at the end of the day the simplest calculation is to work out how long you can survive paying 10% on your current debt level and if it isn't an issue then you can risk going for a shorter dated fix at lower rates but if the debt level is large enough that paying 10% exceeds your income then I would err on the side of caution and trade some short term discount in favour of longer term security.
Rates are going up and sooner than the 3 yr time scale being mooted by the BofE.
Rates will also overshoot to reign in inflation. They always do. It's never not happened.
The first rises will be small, pre-predicted 25bp steps.
At a later date we will start getting 50bp jumps out of the blue to try and haul in spending.
Mortgage rates will get close to double digits over the next 5-10 years. Personally, I think they will go through and probably around the 7 year mark.
Anyway, at the end of the day the simplest calculation is to work out how long you can survive paying 10% on your current debt level and if it isn't an issue then you can risk going for a shorter dated fix at lower rates but if the debt level is large enough that paying 10% exceeds your income then I would err on the side of caution and trade some short term discount in favour of longer term security.
Newc said:
Mr Apple is bang on. As you relax on your terrace in 2024, you will be patting yourself on the back for locking in 10 year money at sub 4% when inflation is already at 3%.
Base rate is going to be at least 2.5% by end 2015, and continuing up from there.
Or he'll be a bit pissed off because rates fell again after a brief rise. I took a 4.69% 5 year fix in early 2009, which is the worst decision I've ever made.Base rate is going to be at least 2.5% by end 2015, and continuing up from there.
Nobody can predict interest rates 3+ years away, as literally anything could happen. Thats why there are so few mortgage companies willing to fix greater than 5 years.
Sub 4% for 10 years is unlikely to prove to be a disaster though, I'll admit.
rossub said:
Or he'll be a bit pissed off because rates fell again after a brief rise. I took a 4.69% 5 year fix in early 2009, which is the worst decision I've ever made.
Nobody can predict interest rates 3+ years away, as literally anything could happen. Thats why there are so few mortgage companies willing to fix greater than 5 years.
Sub 4% for 10 years is unlikely to prove to be a disaster though, I'll admit.
Actually, the main reason we don't have longer fixes is the loss of rollover fees. Nobody can predict interest rates 3+ years away, as literally anything could happen. Thats why there are so few mortgage companies willing to fix greater than 5 years.
Sub 4% for 10 years is unlikely to prove to be a disaster though, I'll admit.
The industry loves the 2 year fix because of the extra fees involved as the product makes people move around.
The other nice thing about fees is that they distort the real cost over two years so you can screw mugs for even more by quoting a lower headline rate.
You are right that no one can predict but like in a race between a horse and a dead donkey the odds will be pretty short for the horse. But the reason we don't have many long dated mortgages is 100% about fees and a lot of hard work by the industry, IFAs, Brokers, Lenders to artificially increase contract turnover. This includes an awful lot of PR work and payments to independent sources.
Totally and utterly agree about the fees screwing people over. I'm comparing mortgages just now to get a feel for things (despite having 7-8 months of my fix left 
) and funnily enough, the cheapest mortgages over the 2,3,5 year term are always the ones with no/very low fees and a slightly higher interest rate.
Thats assuming you pay the fees and dont add them to the mortgage. If you add them to the mortgage, they are even less competitive.
Head-line grabbing low rates, with high fees are a massive con for the general public. I guess thats where a good honest broker comes in.
I will bow to your superior knowledge on the main reason why there is a lack of long term fix products, but the unpredictability has to also be a major factor.
) and funnily enough, the cheapest mortgages over the 2,3,5 year term are always the ones with no/very low fees and a slightly higher interest rate.Thats assuming you pay the fees and dont add them to the mortgage. If you add them to the mortgage, they are even less competitive.
Head-line grabbing low rates, with high fees are a massive con for the general public. I guess thats where a good honest broker comes in.
I will bow to your superior knowledge on the main reason why there is a lack of long term fix products, but the unpredictability has to also be a major factor.
Yup. Most people opt for the lowest rate and roll the high fee into their debt!!!!! It's madness but the industry cleverly pays to the way people think and it knows that almost no one can really work out the true cost. The 2 yr fix is one of the greatest fee inventions the industry has ever created.
The money advice service has a list of the available rates, plus a calcuator where you can see the effect of a higher upfront charge vs lower rate (and vice versa).
https://compare.moneyadviceservice.org.uk/mortgage...
https://compare.moneyadviceservice.org.uk/mortgage...
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