dsmith

Currently looking to move house and increase my mortgage significantly....

I would like a 5 yr fixed deal. However the best I can find are aroung 5.25 to 5.3%, but tracker deals seem suddenly to be all the rage and available for lower 4.25 to 4.50 ish.

Does this mean that Fixed deals are now unpopular and all the smart money is moving into trackers or

The lenders reckon rates are going to rise and are looking to make a killing as the trackers all go up ?



Deano

p.s. any cast iron rate predictions for the next 5 years gratefully received

mook

I don't expect rates to rise by much in the next year or two, especially as closer ties with Europe eventually come through. We are currently sitting at a rate much closer to the rest of Europe and if we eventually join the single currency it will be a factor that cross country interest rates will need to stay reasonably aligned. So, if we join the single currency, chances are you wont need a fixed rate mortgage.

Think of this option. Look at a cashback on a variable rate mortgage, then work out what the interest rate would need to rise to over the 'fixed' period for you to break even. Chances are it would need to go up by 3-4% over the five years to break even, let alone loose out, so it might be a better option, it's certainly worked for me

I'm no financial advisor though and only say these things backed up by my own experiences and a 2.1 degree in economics, so I could be plenty wrong . Hope this is of some help

dba

Its worth considering a discounted rate at the mo as the fixed rates are quite high.I signed up for a 5yr 1% discount 18 months ago.Saving me a bomb over a fixed.I think everyone has shopped themselves silly and retail sales will slow in general.Please do not EVER take any advice from me,do the opposite!

Bas

Stroud & Swindon are offering a 1 year fixed deal at 0.99% (yes that's 0.99%)!!!

Equates to around £83 per month on a £100K mortgage.

Rate then reverts to their SVR

Worth condidering as the first year is always the toughest and you'll save a packet to set against the higher rate from the second year onwards.

Bas

MattN

Bas,

Got any contact details??????

fast bloke

Bas - They have to make their money at some point, so deals like this don't usually save you money, but they do make it easier in year 1.
Most analysts are predicing a rise this year, possibly around 1%. The long term fixed deals are higher now (especially since last Wednesday with some growth announced in the American economy for Q4) cos the banks do not expect rates to sty below 5% for 3 or 5 years. The trackers are still being offered at good rates as the banks are not carrying the risk, but still want to buy your business. After mucho shopping around last week I decided on the Woolwich open plan offset. 4.75% isn't particulary attractive, but it is an 'honest' mortgage where you bear the real cost from day 1, and will be the best option for anyone who does not want to change their mortgage every 2-3 years. The key feature of this is that you get an effective 4.99% APR Net on your current account and any saving you may have. COmpared against a discounted or normal tracker on a 100k loan over 15 years, this could save as much as 25-30k, as the balance on your current account and savings are subtracted from your loan amount before interest is calculated at the end of each day

alistair

Be aware of up front charges for having your house re-valued and other one off set up fees.

Look out for less obvious costs such as it's cheap for a year, but then you have to stay with us for another 3 years at our normal variable rate (or pay a hefty redemption fee).

It's a minefiled as there are loads of offers that all sound similar but are infact very different.

You have to decide variable or fixed, for how long, will you pay up front costs / do you want any cash back now, are you OK with a lock in after the offer has finished ? etc.

Once you know what you want it gets a lot easier (but not easy) !

Fixed rates are based on 'industry standard' forward interest rate calculations. They are basically what a bunch of economists expect to happen, however, it's far from a perfect science and they are often wrong - it's a gamble.

The key question is are you prepared to pay a bit more for the peace of mind of knowing you can pay your mortgage for the next 5 years if rates go through the roof ? It was psycologically easier when fixed rates were lower than variables.

Hopefully no advice given either way here - it really does depend on your personal circumstances..........

father_jack

I'm seeing a mortgage advisor tonight - but my current thinking (for my situation) is to get the cheapest 1 year job with no tie in and build up a wad of cash to pay some off at the end of the cheap year.

dba

fastbloke,

aren't trackers only good if you have a decent balance in your current account? the figs you quote would mean holding several thousand if not more in the account,so perhaps not quite so good if things are a bit tight?

dsmith

I've looked at all the current account/mortgage options but as mentioned above, the house move and subsequent expenditure is unlikely to leave enough signifcant savings to make a dent in the mortgage.

3yr fixed looking fav at the moment. Whilst the discounts are cheaper at the mo I'm prepared to pay a little for some extra peace of mind over the next three years.

Any websites with rate predictions (and the thinking behind them) ?

Deano

fast bloke

dba - a tracker is just an APR that is fixed at a certain rate above BOE Base rate, so if rates come down your payment comes down immediately. SVR does not change immediately.

The Woolwich Open plan offset (or Virgin 1 account) include the contents of your current account and savings in the interest calculations. Say you get paid 2k on 1st of the month. It is unlikely that you spend this all on day 1. If it is there for 10 days, you effective wipe off the interest against the capital youi owe, while maintaining your normal monthly payment, chiping away a bit more at the capital. Next month, you have less overall interest to pay, so your regular payment takes away more capital than month 1, and the balance of your current account takes away the same amount. If you save for say a holiday each year, these savings are also taken from the balance before interest is calculated. You will not find any saving plan or current account that offers 4.9% net and gives you instant access to all your money. Given that the discount lenders will need to make their money at some point, you wont be any worse off even if you never have any savings and spend all the money in your current account on the day it arrives. The only way you would not benefit from this type of mortgage is if you are likely to have an overdraft for the next 25 years. They will also let you defer payments until your loan reaches 90% of the value of the house, so if you want to pay a bit less in the first year you can probably do so.

Deano - have you talked to an advisor about your particular circumstances? They have access to much more info than Joe Public, and generally get similar commision from whatever deal they come up with, so they should be looking for the most suitable deal for you to make sure you don't go elsewhere

fast bloke

p.s. dba - I see what you mean about the potential saving. I was comparing against a loan that was discounted at 3.99 for 2 years then back to SVR which is currently 5.7 for the lender in question, with a 5% redemption to get out before year 5, and making the assumption that you would remain with that lender for term. The saving would not be as substantial against a decent tracker, or if you changed lender and/or plan after 5 years

dsmith

FB - not seen an IFA yet. having spent most of another Sunday browsing the web looking at the deals etc available and playing with spreadsheets have pretty much conclude the time is right to talk to someone "professionally" especially as I going to need more life assurance etc than I've got at the moment.

So anyone got any good recommendations for a Mortgage Advisor/IFA in Suffolk ?

Deano

dba

Thats what I thought FB.Open mortgages are ace if you have a decent balance all the time but if not then a decent discount/or fixed rate could be better due to lopwer interest rates.In fact,the open plan motgages could be decidedly worse,in my maths are up to it!

I'm still finding it difficult to see beyond a discounted rate at the moment,as I still think rates will stay the same.My reckoning is that consumers have spent up and that slowing retail sales will dampen any thoughts of increases.Also,there is still athreat of positive inflation and manufacturing is in a mess.I'm no economist,but I will be moving soon and have to make a decision.With 3years left to go on a 1% below current lending rate deal I blagged at the Woolwich I'm probably better keeping it.

So if ya loaded get an open mortgge,skint,then I'd advise gainst it!

ps your house is in danger if you fail to make the payments and/or listen to dba

SD

Hi Dave,

I'm in agreement about the open-plan affairs and after discussion with my dad (accountant) and other family (owns a Mortgage advice company) we concluded the same as you - It's only good if you have a reasonable amount of savings in the account.

I've gone for a 1% discounted tracker mortgage meself, and that's discounted for nearly 2 years. No redemption fees or valuation fees so I'm happy that I can switch should I need to at a later date. I was told that the general consensus amoungst lenders is there will be a net increase in rates by the end of this year, hence the reason that there aren't so many good fixed rates around at the mo.

When you do move give us a shout and if ya want I'll put you in touch with my Mortgage bloke (family ) who's sorted mine out and after some independant research by myself I haven't been able to find a better deal for my needs so he must be doing something right.

Simon

Disclaimer: You're home is at risk if you do not keep up repayments on a mortgage or other loan secured on it, or if you have a dodgy curry and fart in the direction of the log fire. And similarity to persons living, dead, or half way they is purely coincidental and not my fault, honest. May contain peanuts. Batteries not included.

Maxwell Straker

Just moved my mortgage to the Halifax. Got 2.5 years at 0.05% below BoE rate (currently thats 3.95% variable). Beyond that it goes to BoE plus 1% for another 18 months and then onto the standard Halifax Variable rate (currently 5.75%).

There is no tie in or arrangement fee and a valuation fee of £255. I think I got a good deal and am paying less than I thought I would be. This is the key, go for the deal you feel happy with and are confident with the lender. There will always be someone that gets better than you but that doesn't matter.

dba

cheers Simon,might just do that!

I'm not sure rates will go up.I think retailers will have a tough year as will manufacturing when the full effect of the Eurozone kicks in.Recession IS still a possibility,its just that many have released equity to buy a new soddin car so it doesn't feel like it!

I reckon that a discounted rate is the best option as the fixed rate deals aren't that competitive,as you point out.And even if rates do go up it will a small increase,so the discount will still be better than fixed.With rates this low a discounted has to be the optiom imo.I'm certainly far from convinced about the new open mortages.

Retailers will struggle this year,but you didn't hear that from me


ps you house is definately at risk if you read this post

alistair

Try Charcol for some mortgage comparisons. There are other sililar sites that I looked at when changing, but I can't remeber what they were called.

alistair

Here's another - MoneyExtra

Steve Perriam

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hi deano

carl

And moneysupermarket but they require you to put in all your details before even showing you the rates

father_jack

Saw mortgage advisor - Yorkshire capped (eh oop lad!) looks favourite. But don't need it immediatley as I got out-bid by 40K on the house I was going for.. It went 50% over valuation what is going on.........

FJ

robski

Deano,

long time no see!

right go and get a drink now.......

You really need to consider what you want, security?
how risk averse or risk taking do you want to be?
The ultimate risk is to take a interest only and just pay the interest, good for anyone who can guarantee that they will inherit substatial amounts prior to the mortgage needing to be paid off.
Close is to take interest only and to invest money yourself to cover the mortgage, if you are lucky then you could pay it off very early, fancy your luck with some share investments?
Ultimate risk adverse is a full term fixed. You can get them, not competitive rates today no, but if you compare to 1991 100% of the population was paying a higher rate.

Ive got a 15 year fixed (now unavailable) its 5.89% yep its not as cheap as I could get TODAY, but I know for the next 1 years that thats what Im paying. Its portable so if I decide to move, I can top up with whatever is available then.

Why did I go 15 years? After 10 years (on repayment) youve only paid off approx 25% of the outstanding capital, by 15 years that drops to 55%. Everyones mortgage actually decreases each year due to inflation, so I am guaranteed to be better off each year by whatever inflation is, 2% inflation over 15 years is approx 35% reduction in real terms.

Ok maths time when rates are low, an increase in rates is a higher increase in payments % terms than when rates are high.
Say rates are 5% and go up by 0.5%, thats a 10% increase!
Rates are 15% 0.5 % increase is only approx 3%.
So bear this in mind when thinking of repayments against security.

UK has been historically a high interest country (compared to for instance US) do you think something has fundamentally changed this, or is this just a blip, thats what you are gambling on.

If you are happy to pay say £750 a month, and can guarantee for 10 years thats what you ARE going to pay, do you care if it COULD cost you £650, but would you be able to cope if it went to £1000, or £1250 or higher?

hope this helps

Ive got the number of a good IFA somewhere. Will dig it out. When I say good, he seemed to offer good opinions, I didnt use him in the end as I decided what mortgage I liked before seeing him, he couldnt offer anything better and wanted a higher setup fee than dealing direct.

robski

Bas

MattN

Try this

http://www.stroudandswindon.co.uk/product.asp?sid=2&rid=15&pid=209

Alistair

Agree with you that it depends on what you want. My own view is that it would be worth considering if you think you might be in a position to start repaying chunks of the capital after the first year as a rate rise wouldn't hurt you that much then.

Valuation fee is a bit steep at £495 but I think it depends really on how long a fixed term you are after. Might be good value compared to a 2 year fixed deal but you may lose out against a 3 year deal if rates rise.

Decisions, decisions... (currently in the market myself!)

Bas

[Edited by Bas - 2/4/2002 1:45:30 PM]