Mortgage advice

comeoneric

I am due to remortgage at the end of December and a mortgage broker has suggested a 5yr fixed rate at 5.78% with the Nationwide. On checking their advice I spotted a 5yr fixed offset mortgage with First Direct at 5.98% with the savings I have I could reduce my mortgage by five years with the same payments as Nationwide. With the benefits of the unlimited overpayments and being able to keep my savings I thought this deal was better. Has anybody got any advice?

_Andy_

Are you sure you want to pay high a booking fee for a 2 year fixed rate?

minimike2

Why a fix year fixed? Would you fix for longer? Do you need security of a fix?

herbiesjp

Nationwide are lowering some of their rates.

You can overpay with Nationwide as well, and reduce the term of the mortgage that way

comeoneric

I thought that a 5 year fixed deal was a good compromise between risking the rates dropping and paying start-up fees too many times but still having the safety of fixed payments. The 5 year fixed offset with First Direct appeals as it is tax efficient, a reasonable rate with unlimited overpayments

minimike2

Ok should be ok then....dont let the offset part draw you in if its just overpayments that you want to do...Nationwide will allow £500 a month, so you still have plenty of allowance there.

I cant make a formal recommendation, but you should discuss things with your broker again to come to a final decision.

Rick62

Offsets can be very good for some people, particularly self employed who have fluctuating income or who need cash reserves. For many people they are not worthwhile, the lenders mortgage calculators are misleading and you can often do better by using some savings to reduce the mortgage balance and/or making overpayments.

Locoblade

IMHO an offset should be a no brainer for most people IF the rate is competitive with regular products, as long as you don't mind the hassle of changing banks for your current account. With something like the First Direct offsets, the rates are often hardly, if any higher than most other competitive repayment mortgages, so even if you don't offset anything, its no more expensive than a regular loan. It doesn't take a huge amount of offsetting to bring that effective rate down a little further though, even having £2k in your current account for the whole month drops things a little (in my case by ~£10 a month) and they're very flexible so you can overpay/drop to interest only if need be without any hassle.

This is particularly the case if like me you fall above the 75% LTV but under 80% (FD's cut-off), meaning the best rates from many of the competitive lenders like Nationwide etc aren't quite attainable, if you're at 50-75% then there does seem to be slightly better repayment rates out there than FDs offerings, but not by much.