First Direct Offset Tracker?

rp8049

My fixed rate is up in January and so I'm starting to look around. Given the BoE base rate is likely to fall, possibly quite significantly next year, and fixed rates aren't great at the moment, I'm looking at base rate trackers.

From looking around, it seems that either Nationwide or First Direct offer the best here. The First Direct is very tempting as it's either +.79% with no fee or +.49% with £999 fee and no early redemption etc... and it's a lifetime tracker. I'm thinking it could take a year or two for the financial system to get itself sorted and fixed rate deals to possibly come down again. That coupled with a recession that will probably take a few years to get out of so should mean lower base rates makes these seem the best option until some good fixed rates come up.

Really I'm wondering if there are any other good base rate tracker deals available out there that I've missed. And if anyone has any experience of dealing with First Direct and what they're like.

Also, how are they on valuations as depending on valuation, I could just scrape 40% LTV which may or may not open up better deals?

Any advice is much appreciated

Locoblade

Im about 90% of the way through applying for the +0.49% offset tracker and so far they've been excellent.

Their standard survey is a "drive-by" external one which was free, although Ive seen mentioned of it now being only free on the +0.79% fee free rate, now £99 on the +0.49%, although there's no indication either way on FDs website.

AFAIK, all FD's rates are based on 80% LTV so you'll be fine there, but they won't offer a better rate for anything less.

Only real "downside" is needing to transfer your current account to them, wasnt a problem for me as I wanted to move anyway, but it is a bit of a hassle.

rp8049

I assume you can open a current account with them without having to close the one you have? It would be a joint mortgage and so I would move my joint account over to FD from where it is at the moment.

Do they have any stipulations on what you have to do with the current account (ie if it has to have a certain amount coming in every month etc...)?

Locoblade

Yeh you could do that, I don't believe there's any requirement to have your main current account with them, it just makes sense to have as much of your money in the account for as long as possible each month, because all the time there's money in the current account, it too is offsetting against the mortgage. In my case, £2k sitting in the current account all month will save about £10 a month in interest on the mortgage, not a huge sum but worth having.

daley_lama

Hi

I've applied for the 0.79 tracker today so here's my experience.

I'm no expert whasoever, got my first mortgage 2 years ago, fixed rate. I've been looking everywhere and had an appointment with Barclays today with an advisor. Due to myself having a lump sum, they advised me to go for a Offset tracker 1.19 above base rate. The advisor was sadly very unhelpful and we ended up having an arguement so i left as I felt she was treating me like an idiot (which only my partner is allowed to call me)

I then looked online and found the FD one, at 0.79 with no fees included.

I rang them to go through this and first thing I will point out is that they were extremely helpful in answering any questions, unlike the Barclays' lady who talked down to me.

I will be in a joint mortgage with FD which will require me to open 2 accounts with them. Firstly, a joint current account for the mortgage repayments then secondly a savings account for me to put my lump sum to affset against, this will be in my own name only. Any money to be offset has to be in either of these two accounts

Points to note.

It takes 8-12 weeks to organise through FD

No interest will be paid on your lump sum even if it is larger than the outstanding mortgage

You can pay as much as you like over your repayments, so it's worthwhile going for a longer mortgage at lesser repayment rate if you are nervous about matching repayments.

I might be being a bit dim, but 0.79 over base rate is a competitive variable rate anyway without the offsetting help, so I cant see any flaws in it whatsoever. I'll await the small print though.

Cheers

Daley

Locoblade

daley_lama wrote: »

Firstly, a joint current account for the mortgage repayments then secondly a savings account for me to put my lump sum to affset against, this will be in my own name only. Any money to be ofset has to be in either of these two accounts

You can have more than just those two accounts offsetting, between my wife and I, we'll have 2 sole current accounts, one joint current account plus the joint savings account.

rp8049

Good to hear - I'm having very similar thoughts! Just got to decide between the .79 or .49, but since I don't see myself sticking with it beyond a couple of years, I think the .79 is better as costs slightly less overall.

Locoblade

Do you know what your break-even month is if you overpay the lower rate one at the higher rate? i.e. if the 0.49% deal costs you £1200 a month and the +0.79% would cost £1230 a month, if you paid the 0.49% deal at £1230 a month, do you know how long before the remaining capital (which would have started at +£999) dropped below what it would be for the 0.79% deal? If its less than 2 years then you might be better off on the lower rate with fee, if its over 2 years then maybe not.

Mine (on at £174k mortgage over 21 years) works out at 25 months before the +0.49% deal is beneficial, but I think we might stick/be stuck with this deal for a while so its worth it for us.

rp8049

That's a good question. Would be a 160k mortgage over 25 years. I know that without over paying I think break even is month 25 as well, so might well be beneficial to go with the lower rate. Difficult one that, but a valid point you make!

Locoblade

Given your figures, its actually 28 months if you overpay as I mentioned above, but 82 months if you just pay the minimum monthly on each, according to my spreadsheet. If you overpay further the 28 month thing doesnt change (give or take a month or so), as its fundamentally a direct relationship between the difference in the minimum monthly repayments, ie about £23 in your case.

indig

I am thinking between BR + 0.49 and 0.79 .Just one to clarify that .79 is totally fee free but .49 has some additional fees as well apart from £999 which are Valuation fee (£99 - £200) based on whether property can be externally valued or not and also £ 149 exit fee so would assume will add 8-12 months more into break even time if you haven't included them in your costs.