Mortgage deals from Jan 2017?
Discussion
Friend of mine has a mortgage tie in coming to an end in January. I know things are volatile after last week and with Brexit looming but if you were looking at deals around then what would you be doing? Circa £80k remaining with about £100k equity in house, just coming off a 3 yrs fix.
Upto last week I'd have said tracker but today's news about possible interest rate changes in the near future might lead her to go fixed again. Any thoughts appreciated
Upto last week I'd have said tracker but today's news about possible interest rate changes in the near future might lead her to go fixed again. Any thoughts appreciated
I suppose it depends how affordable the mortgage is. If she could pay it with rates at 5% (for the sake of argument) without issues, then I'd recommend tracker, but if that would be problematic then go fixed.
The fixed rate is set according to the market interest rate forward curve - you only win by going fixed if you think that rates will go up more than the forward curve implies. So a degree of Brexit worries will already be priced in to whatever fixed rate she might get.
Personally I'm on a long fixed rate because I had to stretch affordability a fair bit to get the place I wanted, so 5% would be very painful!
The fixed rate is set according to the market interest rate forward curve - you only win by going fixed if you think that rates will go up more than the forward curve implies. So a degree of Brexit worries will already be priced in to whatever fixed rate she might get.
Personally I'm on a long fixed rate because I had to stretch affordability a fair bit to get the place I wanted, so 5% would be very painful!
I struggle to see how the currently available fixes are good value.
APR is low during the fixed period but they don't revert to anything like the lowest variable levels at the end of the fix, so you're pretty much nailed on to be paying another 'arrangement fee' in 2 or 3 years time when the fix ends.
Factor in the fees and the APR becomes almost irrelevant unless you have a huge mortgage.
An example would be HSBC offering a 1.09% fix for 2 years which then reverts to 3.69% variable, with fees/valuation of roughly £1,000, or £40 per month for the 2 years.
Or with the same provider you could take a standard variable rate (currently 1.74%) and then see how things pan out.
If the base rate rose by 2% in the next 2 years (extremely unlikely IMO) you would still only be paying the same rate as that imposed at the end of the fix even if there had been no base rate increase.
Unless I'm missing something.
APR is low during the fixed period but they don't revert to anything like the lowest variable levels at the end of the fix, so you're pretty much nailed on to be paying another 'arrangement fee' in 2 or 3 years time when the fix ends.
Factor in the fees and the APR becomes almost irrelevant unless you have a huge mortgage.
An example would be HSBC offering a 1.09% fix for 2 years which then reverts to 3.69% variable, with fees/valuation of roughly £1,000, or £40 per month for the 2 years.
Or with the same provider you could take a standard variable rate (currently 1.74%) and then see how things pan out.
If the base rate rose by 2% in the next 2 years (extremely unlikely IMO) you would still only be paying the same rate as that imposed at the end of the fix even if there had been no base rate increase.
Unless I'm missing something.
PorkInsider said:
you're pretty much nailed on to be paying another 'arrangement fee' in 2 or 3 years time when the fix ends.
I think you're right - this is the banks' game, to draw people in to the short fixes with a low rate, then have a high reversionary rate thereafter to keep people switching every few years to drive fee income.PorkInsider said:
If the base rate rose by 2% in the next 2 years (extremely unlikely IMO) you would still only be paying the same rate as that imposed at the end of the fix even if there had been no base rate increase.
Unless I'm missing something.
If the base rate rose by 2% across the two years then your payments would have gone up accordingly if you were on a tracker.....the person on the 1.09% fixed rate would have been shielded from that 2% rate rise....ultimately it all comes down to your perception of the market and your appetite for risk. Most people go for fixed rates as they are on a fixed budget and don't want that to alter for a fixed period of time and are happy to pay a premium over a product that could possible push their budget beyond what they are comfortable with.Unless I'm missing something.
Sarnie said:
PorkInsider said:
If the base rate rose by 2% in the next 2 years (extremely unlikely IMO) you would still only be paying the same rate as that imposed at the end of the fix even if there had been no base rate increase.
Unless I'm missing something.
If the base rate rose by 2% across the two years then your payments would have gone up accordingly if you were on a tracker...Unless I'm missing something.
Perhaps badly worded but what I'm saying is that the person who was on variable which started at 1.74% would, after a 2% rate increase, be paying (almost exactly) the same as the person who took the fix, when the fix ended and they were dumped onto the 3.69% rate even without the base rate increase. So yes they would have been protected for that 2 yr period but unless they then moved to another deal at the end of the fix they would then be paying more than someone who had taken the variable rate to begin with.
Edited by PorkInsider on Friday 18th November 13:49
i see the logic behind that, the fees /tie in is a nice bit of business in itself every few years. given her situation, and knowing she can/does overpay anyway when it suits, i dont think a tracker would be wrong at all here. i think the "fixed" rate deals are probably better when people do want that security and dont want changes or risk for a period of time.
i'm lucky enough i got on a good tracker deal with First Direct a few years ago when i remortgaged a few years back, i paid a fee upfront and got base rate plus 0.5% for the life of the mortgage as i had a large deposit/equity.
i'm lucky enough i got on a good tracker deal with First Direct a few years ago when i remortgaged a few years back, i paid a fee upfront and got base rate plus 0.5% for the life of the mortgage as i had a large deposit/equity.
PorkInsider said:
I understand that.
Perhaps badly worded but what I'm saying is that the person who was on variable which started at 1.74% would, after a 2% rate increase, be paying (almost exactly) the same as the person who took the fix, when the fix ended and they were dumped onto the 3.69% rate even without the base rate increase. So yes they would have been protected for that 2 yr period but unless they then moved to another deal at the end of the fix they would then be paying more than someone who had taken the variable rate to begin with.
You're assuming that that person doesn't remortgage at the end of their fixed rate, which most people do, certainly my clients do......plenty of fee free deals out there!Perhaps badly worded but what I'm saying is that the person who was on variable which started at 1.74% would, after a 2% rate increase, be paying (almost exactly) the same as the person who took the fix, when the fix ended and they were dumped onto the 3.69% rate even without the base rate increase. So yes they would have been protected for that 2 yr period but unless they then moved to another deal at the end of the fix they would then be paying more than someone who had taken the variable rate to begin with.
Edited by PorkInsider on Friday 18th November 13:49
Edited by Sarnie on Saturday 19th November 15:08
Sarnie said:
Your assuming that that person doesn't remortgage at the end of their fixed rate, which most people do, certainly my clients do......plenty or fee free deals out there!
That's true. I was thinking about there not being many good fee-free deals out there.That's why there's a need for people like you, Sarnie.
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