yet another end of fixed rate question

BillTrac

I recently posted that we were coming to the end of our 5-year fixed rate with Nationwide.With another 5 years to go

The outstanding balance is estimated to be £19,000. We have been offered 2-year and 3-year fixed.

Would it be better to take the 3-year fixed and finish the mortgage then or take either the 2 or 3 year fixed and then VR/another fixed for the final period?

TIA

Bill

lisyloo

Do they do a tracker you could take?
You can probably then finish whenever suits you.

At 19K the interest rate risk is minimal e.g. a 1% rise in rates is an extra £16 per month.

Be careful of fees.
Any fees could wipe out savings (over and above SVR).
Have you looked at jsut staying on SVR?

BillTrac

lisyloo,

thanks for the response. Tried to use the thanks button but it won't work.

They won't charge any fees if we go for the fixed rates.

Not really sure I understand how a tracker works? As it is base rate plus whatever, is it a lower interest rate than normal?

Bill

lisyloo

A tracker is related to the Bank of England rate.
This means it moves up and down with the BOE rate.
So sometimes you might pay more and sometimes you might pay less.
So there is some element of risk here.
If you had a £200K mortgage or £300K then it would be risky as the payment could vary a lot, but with a £19K mortgage then the difference is pretty small.

The advantages of a tracker are that often there are no penalties so you can just pay it off when you want.
If you get a fixed rate you usually have penalties so you have to stay on the deal for that duration.

But the fee situation is also important as relatively speaking the fees will be large when considered as a proportion.
e.g. £1000 is approx 5%, but for someone with £200K then it's 0.5%.

payless

The Nationwide trackers has the same penalties as their fixed rates

Have they not also offered you the 5yr fixed with no fee deal ?? - its their lowest fixed rate .( although as mentioned rate has little effect on a short term/ small mortgage) also could overpay by upto £500pm if feel can clear early

JimmyTheWig

What are the interest rates for the 2 and 3 year fixes?

sarkin

The ballance is 19,000 it will not make any diffrence what rate you go for, just ask your lender for a fee free deal. There are people out there with credit card debt higher than your mortgage.

JimmyTheWig

sarkin wrote: »

The ballance is 19,000 it will not make any diffrence what rate you go for, just ask your lender for a fee free deal.

Completely agree difference in fees would dwarf any difference in rates, but I wouldn't say it wouldn't make any difference.
I'd say they're looking at about a £500 difference with a 1% interest rate difference. That's worth having, surely.
Definitely go for fee-free, but within fee-free you may as well go for the lowest rate.

Just a thought...
You know those deals where the rate is low for the first year and then increases over three years? Stepped rates, are they called? Would you have to pay fees on one of those? If not that would be great here, as the balance in subsequent years will be significantly lower than that in the first year.