Fixed mortgage? Ditch & switch to a low rate deal.

MSE_Martin

Fixed mortgage? Ditch & switch to a low rate deal?

After a political kick, most mortgage lenders' variable rates have followed the UK 1.5% interest rate CUT, leaving some on tracker or discounted deals paying historic lows. Pundits predict more rate cuts, though lenders won't necessarily pass them on.

Ditch your fix checklist! By definition, those on fixed-rates haven’t gained. Many are asking whether ditching & switching, even with a penalty, will save you cash. Here's the checklist:

• Loan-to-values (LTV). Only those borrowing LESS than 75% of a home’s current value are likely to get competitive deals. Otherwise, saving by switching's unlikely.
• Interest rate. Those who fixed at 5% or less are unlikely to gain; nearer 6% and savings are possible.
• Fix length. Those on short-term deals are most likely to gain. With longer, five or 10 year fixes, it's a balance of rate security vs short term savings.
• The penalty. Most fixed-rate deals have big penalties if you leave early. Yet the sheer rate cut size means even a £1,000+ penalty may be worth paying.
• When it ends. If your deal ends within a few months, it's unlikely to be worth paying the penalty. Yet if you've longer to go, and ditching & switching's more attractive.

How to find out: If the checklist makes a ditch, switch & save possible, contact a whole of market broker to do some detailed comparison numbers, incl. switching fees. Most reputable brokers won’t charge you unless you actually end up getting a new deal through them. More info: Mortgage Broker Guide, Remortgage Guide.

payless

Some mortgage brokers have commented on this idea already

http://forums.moneysavingexpert.com/showthread.html?t=1313271

BobbinAlong

Before switching or paying off a fixed rate deal check the penalties as they drop each year and waiting until the anniversary of your mortgage, especially if it isn't far off could mean a saving. My charges drop by £500 each February.

masimmonds

As a matter of interest is anyone out there with the Chelsea Building Society. I have a very good tracker deal with them at the moment which finishes in March. But there base rate is still 7.24% and they don't yet have any other deals.. How bad is that, does anyone know if they will reduce it? Surely they will.

plaza_2

In August I signed up to a 5 year fixed rate deal with Northern Rock for 6.7% - in hindsight a bad move - and have been considering ditching the fix for a couple of weeks.

The only light at the end of the tunnel is that I can have a balance in the Northern Rock mortgage of just £1 without paying a redemption penalty to them. So my question is - can you have effectively two mortgages on the same property? I assume not but thought I would ask anyway...

If not - anyone got any bright ideas?

Cheers.

_Andy_

plaza wrote: »

In August I signed up to a 5 year fixed rate deal with Northern Rock for 6.7% - in hindsight a bad move - and have been considering ditching the fix for a couple of weeks.

The only light at the end of the tunnel is that I can have a balance in the Northern Rock mortgage of just £1 without paying a redemption penalty to them. So my question is - can you have effectively two mortgages on the same property? I assume not but thought I would ask anyway...

If not - anyone got any bright ideas?

Cheers.

No it would then be a second charge so you'd be looking at a secured loan with much higher interest rates than a mortgage.

dunstonh

In August I signed up to a 5 year fixed rate deal with Northern Rock for 6.7% - in hindsight a bad move

Why? You know that for 5 years exactly what your mortgage payments are going to be. With Martin's proposal you may make a small monetary gain right now but in years to come when rates rise again, you could be worse off.

do you want certainty or gain now and pain later?

arkie

DONT ditch the fixed .... you will be adding to your mortgage, do not be misled by somebody who is not qualified ( ie Martin ) look at what reclaiming bank charges has done ( loss of free banking).
Us brokers have commented on this misleading article and Martin has not replied ...are you there Martin, the broker industry waits....

Welshlassie

This is something I have been considering for a few weeks, I have been using this to give me a comparison as to whether it would be financially viable and worthwhile.

I haven't found the right deal yet, but in Jan when I come to the anniversary of the deal I will be looking again as bit more closely.

Leighthal

Welshlassie wrote: »

This is something I have been considering for a few weeks, I have been using this to give me a comparison as to whether it would be financially viable and worthwhile.

I haven't found the right deal yet, but in Jan when I come to the anniversary of the deal I will be looking again as bit more closely.

I fixed at 5.98% for 10 years(on 66k) with Nationwide back in October 2007.I'm also wondering if I can fix lower and save even with a penalty.
Your link does'nt work BTW.

Leigh

latecomer

We'd need to see a change in rates of approx 2% from our fixed rate of 5.39% just to cover the redemption penalty :rotfl: