When to leave SVR for fixed rate?

davidla

Hi
We bought our place 2 years ago for 150k with 15% deposit. Our fixed rate comes to an end in Jan with Abbey so we will go onto their SVR at 4.94% (almost identical to our fixed rate).
What I am worried about is that house prices will go down and when interest rates start to rise (as they surely will at some point) we will be between a rock and a hard place regarding remortgaging: low LTV and high interest rates.
So is it better to try and remortgage now (when we still have a roughly 85% LTV) or just wait and wait and hope that at some point we will be able to remortgage when somehow low-ish interest rates combine with rising house prices?
Thanks!
David

olly300

No one has a crystal ball so you have to make the decision yourself.

I have friends who have re-mortgaged at fixed rates now so they know how much they have to pay back as they want that stability. Others like myself are on their bank's SVR.

davidla

I appreciate that it is my decision - I just wondered if people more experienced in these matters than myself might be able to take an educated guess as to whether there will be a point when "low-ish interest rates [will]combine with rising house prices" or in the next couple of years will these 2 factors never combine?
David

beecher

What deals have Abbey offered you? No-one knows if low ish interest rates will combine with rising house prices, but I'd be prepared for your LTV to rise quite a bit in the short term. Only you can judge when it is worth jumping ship - I'm holding off for a 4% fix with minimal fees which may or may not turn up but I have a low LTV so it is worth the risk. Look around and see what's out there and work out what is important to you - the safety of a fixed rate which may mean shelling out more in the short term, or taking a risk on being able to get a decent deal with a higher LTV.

edit: I doubt if you have an LTV of 85% now as your house will likely be worth less than it was 2 years ago.

dunstonh

As of yesterday my 5 year tracker came to end (a tracker +0.1% would you believe - talk about running out at the wrong time). I am now on the SVR and intend to stay on it until the next round of interest rate cuts.

I dont think the SVR will drop any more and I reckon many trackers will impose their floors and/or increase the tracker differential even more. However, fixed rates will possibly be even more attractive and it will be then that I jump on the fixed rate.

Time will tell if I get it right. However, with rates as they are, most fixed rate deals in early 2009 is going to be attractive if you buy a long term one. These rates wont stay down for long and the when the recession is drawing to a close, inflation could rise quickly and at that point the BOE will be able to increase rates again and expect it to happen quickly.

davidla

Thanks for both your comments.
Last time I checked with Abbey it was well over 6% - I will check with them again after the next BOE meeting.
Our LTV is possibly a bit complicated - the 150k we paid was (I think) a bit under the going rate as the lady wanted a quick/easy sale. Our neighbours (same style maisonette except they have double glazing but we have central heating) are looking to sell their place for 160K (it was originally priced at 180k!) However on Nationwide house price calculator their place should be worth 167k! Apparently ours should be 145k (because they bought theirs 4 years before we did).
I would like to get a 5 or 10 year fixed rate at (or close to) 5% - I suppose we will have to see how the Banks react to the next BOE meeting and whether 5/10 year rates come down and if there are decent 85% (or more) LTV rates out there.
David

jm28cardiff

Im coming off a fix and going onto the SVR with Nationwide at the end of December. Im just going to leave it on SVR, and the minute interest rates go up again, I will look for another fix. Im not doing it yet as I expect rates to go down a bit more before they go up.

ashleyk

I am in a very similar situation to yourself davidla having bought our first house 2 years ago for £160K with a 30K deposit. Having just gone onto their SVR, I called up the Halifax earlier and reserved a fixed rate deal for 10 years at 5.49%. This is about £50 per month more than we are currently paying but the deal won't start until April, so we can jump on a better deal if something better comes along in the next 3 months which I believe is possible.

Had we been in a position with greater equity I would have sat here and just waited it out because I am fairly sure there will be some long term low rate deals in 6 months time, but if house prices keep falling at their present rate for a few months and there are any further shocks we could have found it very difficult indeed to get a new deal despite having a perfect credit record. We have to remember that external factors such as a sudden increase in oil etc could force up interest rates very quickly and I didn't trust the banks with the tracker deals anyway. We didn't want a short term deal only to find ourselves in negative equity two years from now with spiralling rates and unable to get any deal. In 10 years time prices should be up and we'll hopefully have plenty of equity. I hope that helps because I know its not an easy decision.

davidla

ashleyk wrote: »

Had we been in a position with greater equity

Well that is the key really. If we had decent equity I wouldn't be worried. But as my dear old Dad used to day, "If we had some eggs we could have some eggs and bacon if we had some bacon."
I'd like to get something sorted sooner rather than later because of fears about house prices sinking further and further, but that perfect moment of low rate/high enough LTV is hard to find!
Well let's see what happens when the BOE meet and if we can get a decent rate.
Well done to you Ashley on getting your rate sorted.
David

caracal_77

davidla wrote: »

"If we had some eggs we could have some eggs and bacon if we had some bacon."

That's a good one...:beer:

ashleyk

You'd need a crystal ball right now to know what is going to happen over the next few months or even years but as I see it the banks are holding all the cards right now because its a falling market and they alone decide how to value your house when lending the money.

5.49% is quite a bit higher than I would have liked to pay and I agree that we may well see some long term 4% deals for those with good equity but perhaps I'll manage to grab a slightly cheaper rate in the next month or two if rates come down and I think it will even out over a ten year period compared to other choices, especially with no additional product fees every 2 years. Remember there is no guarantee that the SVR will stay low for very long and while many are aiming to jump on a good deal later on its inevitable that some will get badly burned.

Every case will be different but sadly I think its unlikely at that this point for you to still have 15% equity. We both bought our houses near the peak of the market so you may be lucky to have even 5% at this point. We started over paying a couple months ago partly to try and offset the fall in equity but also to show the bank we could afford the extra amount. In the long run I've calculated that it should save us £50K in interest and shave 11 years off the mortgage as well.

There is a lot of hysteria out there at the moment being whipped up by the doom mongers who seem to gain pleasure from all of this and I was rather nervous about about making the application but it was all very simple and they didn't even ask me how much I earn.