mortgage crystal ball

[DudleySquires]

Didn't know whether to put this here or in HG&DIY.

Remortgage time. Just coming to the end of a two year fix 3.98%. £90k remaining against £120k value. Don't know if I want another fix or to go with a tracker. I'd have been better to go with a tracker last time round, but of course my crystal ball wasn't working.

Current provider is offering 3.29 two year tracker and a 3.49 two year fix. £100 fee in each case. The curve ball is a 3.99 5 year fix. Same fee. All have a 10% overpayment facility, which I am expecting to be able to use at some point. The 5 year option essentially means I can stay on my current rate for another 5 years and it'll cost me £100. Rates must go up but when??

So I'd like your opinions both on these deals, and on what you expect to happen to rates over the next couple of years. And if anyone can help with better deals that would be interesting too

Ta!

Edited by DudleySquires on Sunday 27th January 11:10

[egor110]

Nobody knows when the rates will go up, if they were going to rise anytime soon then banks would be whacking up the rates on fixed mortgages as they know everyone would want them.

In your situations I'd ask if the rates do go up could you afford it if not then fix and it won't be a worry for you and secondly is it worth remortaging every 2 years? Don't you have to get a survey done each time?

[Sarnie]

DudleySquires said:

Didn't know whether to put this here or in HG&DIY.

Remortgage time. Just coming to the end of a two year fix 3.98%. £90k remaining against £120k value. Don't know if I want another fix or to go with a tracker. I'd have been better to go with a tracker last time round, but of course my crystal ball wasn't working.

Current provider is offering 3.29 two year tracker and a 3.49 two year fix. £100 fee in each case. The curve ball is a 3.99 5 year fix. Same fee. All have a 10% overpayment facility, which I am expecting to be able to use at some point. The 5 year option essentially means I can stay on my current rate for another 5 years and it'll cost me £100. Rates must go up but when??

So I'd like your opinions both on these deals, and on what you expect to happen to rates over the next couple of years. And if anyone can help with better deals that would be interesting too

Ta!

Edited by DudleySquires on Sunday 27th January 11:10

Personally, I can't see ANY value in tracker products at the moment. With the base rate at 0.5% there's little to no scope for it to go down any further, but even if it did, most tracker products nowadays carry floor rates that dictate that the rate of the product can't go lower than the initial rate. Therefore, all your doing is exposing yourself for when the rates start to go back up, whenever that may be.

Having a quick look, there are rates lower than what your lender has to offer such as a 2.79% Two year fixed rate but it would need to be worked out whether the cost of moving is outweighed by the savings of doing so. E.g there is a £400 arrangement fee so you would have to save £16+ per month over 24 months (£400 / 24 = £16.66) for it to be worth it.

[Sarnie]

egor110 said:

In your situations I'd ask if the rates do go up could you afford it if not then fix and it won't be a worry for you and secondly is it worth remortaging every 2 years? Don't you have to get a survey done each time?

If you move lender then yes, but most lenders have products with Free surveys, if you specifically require one.

[DudleySquires]

Forgot to say there is a £225 fee for the privilege of them (Santander, btw) letting me leave, if I choose another provider.

As a general rule, I've been told that there will be no new valuations / credit checks etc if I stay with my current provider.

[egor110]

DudleySquires said:

Forgot to say there is a £225 fee for the privilege of them (Santander, btw) letting me leave, if I choose another provider.

As a general rule, I've been told that there will be no new valuations / credit checks etc if I stay with my current provider.

So really you need to do decide if your willing to pay the higher fixed rate but know you don't need to worry if the rates go up.

In my case the mortgage is under 50k and I came off a 6% fix a few years ago so I know I could ride the increase if I had to but if I had a higher loan and knew I couldn't cope if rates went skywards I'd of gone for the fix.

[Cemesis]

I've just signed upto a fixed 4 year at 3.59% (£200k on £250k). The trackers from Nationwide were actually more expensive? Odd.

Annoyingly the rate then went down to 3.49% about 2 weeks later. Still, its a couple of hundred less than we were paying and with overpayments we should be down to 60% after 4 years.

[IAN1967]

Check what your current deal reverts to at the end of the fixed period.
I came off a 5 year fixed deal a couple of years ago and after looking at the small print it went to half % above base rate for the remainder of the term, suffice to say I left it at that

[Sarnie]

IAN1967 said:

Check what your current deal reverts to at the end of the fixed period.
I came off a 5 year fixed deal a couple of years ago and after looking at the small print it went to half % above base rate for the remainder of the term, suffice to say I left it at that

He's going on to the Santander SVR of 4.74%.....

[boxst]

The other thing with moving mortgages all the time is that you are never really paying off any capital as all the interest is front loaded.

[TheInternet]

boxst said:

The other thing with moving mortgages all the time is that you are never really paying off any capital as all the interest is front loaded.

Elaborate for thickie please.

[egor110]

IAN1967 said:

Check what your current deal reverts to at the end of the fixed period.
I came off a 5 year fixed deal a couple of years ago and after looking at the small print it went to half % above base rate for the remainder of the term, suffice to say I left it at that

Would that be nationwide?

[boxst]

TheInternet said:

Elaborate for thickie please.

From a few seconds searching, this is the best picture I can find. If you swap continually, you are back to paying off mostly interest:

[Crafty_]

Leaving aside the cost of changing, lets say you went with the tracker and we got a 0.25% rate increase - you'd be paying 3.54% anyway.

I'd go with the fixed if you are choosing between those two.

If you can get down under 3% as Sarnie mentions its slightly less clear cut.

But this is only one consideration in the choice.

As far as front loaded interest goes, not sure I've ever seen that ?
If on a repayment mortgage for each monthly payment you should pay less interest and a little more capital.
The breakdown for my mortgage payments shows the interest amount decreasing and the capital repayment increasing.
I've always been paying capital off since day 1.

[TheInternet]

boxst said:

TheInternet said:

Elaborate for thickie please.

From a few seconds searching, this is the best picture I can find. If you swap continually, you are back to paying off mostly interest:

Assuming all is like-for-like and you don't change the remaining term are you not just starting from further along the curve?

[xr287]

boxst said:

TheInternet said:

Elaborate for thickie please.

From a few seconds searching, this is the best picture I can find. If you swap continually, you are back to paying off mostly interest:

That's not how it works. If you had your mortgage with provider A from year 0 to year 5 then swap to provider B (for simplification lets assume there are no charges for moving and your new deal is at the same % as before) you technically jump back to year 0 on the mortgage graph on your "new" mortgage with provider B in terms of interest to capital ratio BUT in the whole life graph of your mortgage you are continuing from year 5, you have already paid off some capital during the first 5 years so in your "new" mortgage are paying off less interest each month.

You can test this by using something like this amortisation calculator http://easycalculation.com/mortgage/amortization.p... Stick in your first mortgage, take the remaining principle after 5 years then plug in your new mortgage with reduced amount of principle remaining after 5 years and 5 years less on the term and you can see you wouldn't pay any more interest than if you had stuck with your original mortgage (all % being the same and ignoring fees for an easier calculation)

[DudleySquires]

IAN1967 said:

I came off a 5 year fixed deal a couple of years ago and after looking at the small print it went to half % above base rate for the remainder of the term, suffice to say I left it at that

I'll have a bit of that please!

I knew the score re amount of interest and capital I'm paying each month, but that graph really brings it home!

[Crafty_]

boxst said:

From a few seconds searching, this is the best picture I can find. If you swap continually, you are back to paying off mostly interest:

All that graph means is that more of your monthly repayment goes on capital at the end of the mortgage term.

E.g.

Mortgage is taken out for £100k.
You repay £500 a month.
I won't work out exact figures but lets say £450 of that is interest, £50 capital
By the time you are a year or two away from finishing the mortgage you only owe (say) £10k
But you are still repaying £500 a month.
Interest on 10k is alot less than interest on 100k
So, out of your £500 you end up only paying (say) £100 interest, while £400 comes off the capital.

That curve just shows the tipping point.

[Sarnie]

boxst said:

The other thing with moving mortgages all the time is that you are never really paying off any capital as all the interest is front loaded.

Nothing like giving people incorrect information

Your statement would only be correct if you reverted to 25 years every time you remortgaged.......

[eliot]

Sarnie said:

Personally, I can't see ANY value in tracker products at the moment..

My view is that I have a known predictable interest rate. The lender can't profiteer from raising rates faster than actual rates and indeed not lowering them when they come down.