Mortgage - relating initial interest rate to lender's base r

[AlexC1981]

...ate.

Hi All,

I'm thinking about taking up the HSBC Special Fee Free tracker mortgage. I am borrowing less than 60% of the property value, so it will track at 1.89% + the BoE base rate = 2.39% for the term. (dependant on BoE rate)

The lender's base rate is 3.94%. This is stated on moneysupermarket alongside the above info. What does the lenders base rate mean? How does it affect what I will (may) be paying?

First Direct have an initial base rate of 2.49% and their lenders base rate is 3.69%, which makes HSBC's look high.

Cheers.

[Sarnie]

Your confusing the Bank of England Base rate and the lenders Standard Variable Rate.

If HSBC's product is BoEBR +1.89% for the term of your mortgage then you do not need to worry about what their SVR is.

[JRM]

I'd be surprised if anything is tracked to BoE baserate. Because of the rate dropping so fast during teh financial crisis, most banks only now offer a tracker as being x% above their internal base rate i.e. the HSBC baserate, which is whatever they want it to be.

Typically though their baserate will move up and down in line the BoE, it's just that they want to have an increased margin between the two.

[Sarnie]

JRM said:

I'd be surprised if anything is tracked to BoE baserate. Because of the rate dropping so fast during teh financial crisis, most banks only now offer a tracker as being x% above their internal base rate i.e. the HSBC baserate, which is whatever they want it to be.

Typically though their baserate will move up and down in line the BoE, it's just that they want to have an increased margin between the two.

The OP is talking about a Tracker Rate, your talking about a Discounted Rate.

[JRM]

I'd be surprised if anything is tracked to BoE baserate. Because of the rate dropping so fast during teh financial crisis, most banks only now offer a tracker as being x% above their internal base rate i.e. the HSBC baserate, which is whatever they want it to be.

Typically though their baserate will move up and down in line the BoE, it's just that they want to have an increased margin between the two.

[Sarnie]

Repost??

[Trustmeimadoctor]

mines an offset tracker on boe base rate but its a staff product

[scotal]

Virtually all trackers track the BoE base rate. The obvious exception to that is Barclays, which track Barclays Base rate. The Barclays Base rate has never been different to the BoE base.

The lenders currently have huge discrepancies in their SVR's. Some Nationwide and C&G customers have a 2.5% SVR, others have a 4.5%(I think) SVR. Halifax's SVR is 3.5%, One lender has a 5.99%. Those are I think the rates that JRM is talking about. They are not used in the calculation of trackers. He's also involving the margin over base charged by lenders, which have widened since the credit crunch.

To the OP, what Sarnie said is correct. If your mortgage is a lifetime tracker, at BoE base + 1.89%, your interest rate will always be BoE base + 1.89%. When the base rate changes, so does your mortgage interest.

[AlexC1981]

Thanks all. I have booked an appointment at my local branch for Monday. This took ages going through HSBC's call center, which doesn't bode well for the future communication, but we got there in the end.

I did not understand why moneysupermarket gave the lenders base rate in the quote when it wasn't relevant. It's all confusing enough as it is!

[scotal]

AlexC1981 said:

Thanks all. I have booked an appointment at my local branch for Monday. This took ages going through HSBC's call center, which doesn't bode well for the future communication, but we got there in the end.

I did not understand why moneysupermarket gave the lenders base rate in the quote when it wasn't relevant. It's all confusing enough as it is!

Its regulatory, they have to.

[AlexC1981]

Righto, that clears that up

I was playing with the options on moneysupermarket. It looks like I could extend the HSBC special fee free mortgage over 30 years instead of 25 and still keep the same percentage rate.

My plan is to pay off the mortgage in 7 or 8 years to minimise the overall value paid back. There's no penalties for overpaying on this particular mortgage.

If I have it set out over 30 years the payments would be pretty small if I ever fell on hard times and did not want to overpay. Is this ok to do? Is there a downside?

Thanks.

I initially got some recommendations from a broker, but everything he sent seemed a lot higher than what I found on moneysupermarket.

[scotal]

AlexC1981 said:

If I have it set out over 30 years the payments would be pretty small if I ever fell on hard times and did not want to overpay. Is this ok to do? Is there a downside?

Depends on your age. As long as the term fits with HSBC's policy on retirement age, then there's no reason why you shouldn't do it.
However there are warnings that come with lengthening the term.HSBC should run through that with you.
(they will of course not be giving you advice, however much it might feel that they are.)

AlexC1981 said:

I initially got some recommendations from a broker, but everything he sent seemed a lot higher than what I found on moneysupermarket.

Maybe you went to the wrong broker?
Of course the broker should have been able to answer all the questions you now have that Moneysupermarket can't.