Any mortgage brokers online

MSE_Martin

Just a quicky...

This is going in the tip..

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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, so you need to examine 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 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 do this free (though some charge if you actually switch). More info: Mortgage Broker Guide, Remortgage Guide. Discuss: Ditch your fix
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In the how to find out section, my aim is to point people to brokers to get a calculation done if switching & saving is possible. I presume my phrasing on most reputable brokers do this for free is fair?

Martin

forerunner_uk

I am a mortgage broker. It is possible to save overall based on the criteria that you have shown.

Some reputable brokers charge fees and others do not. A consumer can choose which type of service they prefer. Personally I do not charge fees as lender commission are more than adequate.

payless

capitalisation of an early repayment charge , exit / MEAF fees and new arrangement fees can seriously increase the debt.

But I've seen recommendations for this to be done..." as the monthly payments will be lower" regardless to the fact that the debt will be much higher at end of the "deal"

payless

Will regard to fees- yes a lot of brokers don't charge.. but are they all quoting the best "new deals" or only those that pay a commission?

MSE_Martin

Interesting as you haven't read it as i intended.

The note wasn't meant to say that most reputable brokers WONT charge, unless you actually get a mortgage through them. Rather than WONT charge at any point. Is that not how it reads?

Im going to change

Most reputable brokers do this free (though some charge if you actually switch).

To

Most reputable brokers won’t charge unless you actually end up getting a new deal through them.

Martin

minimike2

Martin,

I dont think it is prudent for clients to break a fixed deal at present, under any circumstances - even if they are at 6%.

1. The ERC. Not only do they have the ERC to pay, which in most cases will outweigh the savings through monthly payment anyway, but in 99% of cases this will be added to the mortgage. Think about the interest and compounded interest that this will accrue over 20 years. I would estimate the interest on an added ERC for an average mortgage over an average term to equate to about £3000. Then there is the new arrangement fee.....most people add these too, so on average figures again, there is another £1000 in interest.

2. They toook a fixed deal for a reason. Fixed pricing has yet to reduce (and shows no real signs of doing so, at least not without large product fees). This means that any new deal, when factoring in the new arrangement fee (which will undoubtedly be higher than the previous one) and any exit fee etc, clients are unlikely to get a competitive new fixed deal. This leave the option of a tracker - where we have seen margins virtually double in recent weeks. People might be tempted in by lower rates, but end up with a totally inappropriate product. People on fixed deals take them because they need the ability to budget.

You can argue that base rate is low and may decrease further, but with trackers now typically having a five year tie in, what happens when base rate goes back up to a more "normal" level.....possibly higher than 7% as is compensates for its current low rate. People could end up being tied into 9% mortgage rates.

Ok, I can hear what people are saying to that "Oh but look at whats happening in the economny, THAT isnt going to happen"........Go back 12 months.....how many people said that a 3% base rate (and below) would not happen in 12 months........hands up who thought that then and is now thinking we will not see a 5% base rate again in the next 5 years....


Monthly payments should not be the priority for the vast majority of mortgage holders. Suitability of product and overall costs should be the two main factors.

Now is simply NOT the time for people to break a fixed deal just because the base rate is down. IF, and I stress IF, we see sub 4% fixed deals with less than average arrangement fees, then it would be prudent for clients to REVIEW thier deals with a professional adviser, to look at the overall implications. I have been becoming more and more concerned over the past few weeks with the numbers of people coming on here who have been contemplating breaking a fixed to go onto a tracker. Likewise I have had many enquiries from new and existing clients about doing this.....I have told them all to stay put.......since that earns me no money, whereas moving them would, I think that pretty much demonstrates that I am not talking crap here.

I would urge you to leave this out of the guide *at this time* and review again in a few months when maybe LIBOR might have dropped further and we possibly see some further reduction in lenders rates (that will be the day!!).



On the other hand, it may be worth putting something in about people coming onto SVR.....most will be better off putting off remortgaging for the time being........something I am all too often having to recommend clients do....again, not something that I earn from, yet is sound advice at present, so unless they HAVE to fix again immediately they might be better off waiting, UNLESS they are very high LTV / Borderline LTV where products are dissapearing and they may lose the option to remortgage again alltogether come six months time.



Thanks for asking for input and of course if you choose to put this in then that is your decision, however once again I would appeal to you to not do so at this time, else no doubt MANY people who "DIY" thier mortgage will end up making a huge mistake after reading it - the mere inclusion of it in the guide inplicates it as a good idea, which IMO is not good.



Mike

MSE_Martin

Hi Mike

The 'send button' was pressed before your reply (thank you for that), however I do think the piece is appropriate and the right thing to do.

It is a question that has been very prevalent in my mailbag. As we both know there are no blanket answers. Which is why I wrote it this way. Please read exactly what I'm saying

A. First it is a checklist which you have to go through first to see if there's any chance you can save. I've written that in a way that after the checklist most people will see they can't save.

B. For those that do, all I'm suggesting is they go and get the numbers done properly and see if it is suitable with a whole of market broker. If at that point they and the broker agree it is suitable - then I would hope it is. If not then nothing is lost.

However after reading your reply I have tweaked for teh remaining send to make it more clear why I'm doing this so...

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

is replaced with


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:


Martin

Airwolf1

I'm not a mortgage advisor, but would like to add a comment.

I recently tried to get a mortgage (failed due to level of income - which is another story), so I am now stuck on NR's variable rate, which thankfully has gone down. However, when I was applying for a mortgage, trackers for 2 years appeared to be tempting, plus there were no fees with some - unless I was to be told of them had I got the mortgage. A friend is in a similar position to what Martin suggests, he is on a fixed rate of 6. something % until 2012. He could afford to pay any fees for leaving early though and get a good deal on a tracker, which may currently be a better option for him due to the current base rate dropping and the further anticipated drop too. He could still pay the same amount to his mortgage, hence clearing it sooner.

payless

Ditch your fix-

Sounds like a media hype / soundbite

Mike made a lot of good points ( I was unable to add o my original post last night ).. currently I'm finding advice is-
stay on SVR or
Do an inhouse swap ( likes of Cov BS!)
Swap to direct only , no tie low mnargin tracker

Others have mentioned concerns of swapping from secure fixed to variable already - Whislt it may be possible to switch midf-fix to a lower fix, the cases where this makes sense will ( at current available deals) be limited especially when the cost of swap ( and compounding effect ) is taken into account.- maybe worth a look, but don't hold your breath

Fees - yeah I'm sure most good brokers will do the sums - free of charge , but then whether they advise someone to do it is another thing .. can see the claims ... adviser told me to switch from my lovely fixed rate just to earn a commisison.

payless

The inclusion of the link that includes cashback ( no advice) brokers article in same post as saying - most brokers will do the sums for free ??

minimike2

Airwolf1 wrote: »

I'm not a mortgage advisor, but would like to add a comment.

I recently tried to get a mortgage (failed due to level of income - which is another story), so I am now stuck on NR's variable rate, which thankfully has gone down. However, when I was applying for a mortgage, trackers for 2 years appeared to be tempting, plus there were no fees with some - unless I was to be told of them had I got the mortgage. A friend is in a similar position to what Martin suggests, he is on a fixed rate of 6. something % until 2012. He could afford to pay any fees for leaving early though and get a good deal on a tracker, which may currently be a better option for him due to the current base rate dropping and the further anticipated drop too. He could still pay the same amount to his mortgage, hence clearing it sooner.

Can you please tell me why you think a tracker may "be a better option" for him?



As I have said above, people should not be *current* rate driven as thier main priority.....the SUITABILITY of the product to the persons personal circumstances followed by the overall cost, should be the main priorities. There was a reason your friend took a fixed rate deal and I suggest they sit down and think about the reason they took a fixed rate before "jumping ship".



Why are people forever trying to use predicting the market as a basis for making a decision on a mortgage. So many people are playing a dangerous game here and things like this really emphisise the importance of seeking professional advice.....remember brokers are not just here to find the "cheapest" mortgage..........we are here to recommend *suitable* prodcuts based on circumstance, something which 90% of consumers fail to grasp or indeed do for themselves. The number of people who DIY thier mortgage who have an unsuitable product is alarming, purely because they have failed to consider the consequences of being a "rate chaser" and being sucked in by a lenders "headline" rate.



I still feel that the article is not approprite - it says "low rate" - I challenge anyone to find a fixed "low rate" that doesnt have a massive arrangement fee, that would actually save money for someone with an average £100k mortgage with 3/5 years left to run......hence why loads will swap to trackers, which for most will be innapropriate and could see them stung going forward.


As i previously said, once the prodcuts (or should I say IF) become available, THEN this article would hit the nail on the head, but in my professional opinion, now is not the time.