To switch or not to switch???

Leftynick

Hi,

We currently have a 3 year fixed mortgage with YBS which runs out in October. We are looking to move this summer but will incur a 3% early repayment fee (Approx £2500) if we change lender or dont buy somewhere else before October (staying with YBS). The new deal we are likely to get is fixed for 2 - 3 years at 4.99% and we're looking to borrow £120,000 and put about £30,000 down.

I've looked on the comparison sites and YBS dont appear to be the best however some of the higher ranked ones i have never heard of - can they be trusted? Do people thin it would be worth our while to change lenders in the long run? Looking to pay out no more than £800 per month by the way and want a fixed rate over a term of 22-25 years....

What do people think would be the best thing to do based on the figures above?

silvercar

If YBS will let you move mortgage to a new property without a redemption charge then do that and think about moving your mortgage when the 3 years is up.

Ian_W

Hi Lefty,
As silvercar says your loan may well be portable to a new property so you need to check that out with YBS.
Few other points about your post:
1. The 4.99 may not be available next month let alone in the summer or October. It will depend what interest rates, or more properly swap rates [long term money market rates] do between now and when you remortgage.
2. YBS and a few other lenders, [Britannia, HSBC, IF I think] tend not to appear on the comparison sites as they're not available through brokers. Doesn't mean they aren't competetive, just that they aren't listed. Check them out direct on their own sites.
3. Mortgages are regulated by the FSA so the fact you've never heard of a lender doesn't mean you can't trust them. What's the worst that can happen - they go bust with you owing them money, better IMO than the other way around!!
4. Not sure there are any lenders who do 22-25 year fixed, even if they do it might not look attractive compared to shorter term fixed rates. Quite a few lenders do 10yr fixed but even those look quite exe compared to current shorter term fixed rates.

I think it's very difficult to try to second guess what is going to be available in the 6 months time [summer] or 9 months [October] in terms of rates and costs. New products and offers from different lenders come and go all the time. Keep up to speed with what's on offer twixt now and then, but don't expect an offer that comes out next week to be available when you want it.

HTH & BoL.

Leftynick

Just to clarify - we are not looking for a fixed rate for 22-25 years! We are looking for a fixed rate for 2-5 years on a mortgage taken out over 22-25 years.

As i understand it having spoken to YBS we can move the mortgage to a new property without a redemption charge proiding we have completed on the property before October. The risk comes if we sell ours and then cant find another before October in which case we would have to pay the redemption. The other option is just to wait until October and do it all then but winter is not the ideal time to be selling houses and moving.

Incidently, YBS did appear on moneysupermarket but were not near the top - these spots were occupied by Chelsea and Scarborough. There were also deals which included cashback - are these any good??

Ian_W

Can't comment on the specific Chelsea or Scarborough ones but check them very carefully, cash-backs often involve a long tie-in at not overly good rates. IMO, there's no free lunches on mortgages, some deals are better than others but things like c/b or very low intro rates usually have to be paid for sometime later. OK if you need them short term so long as you appreciate and are happy to pay the later costs.

Leftynick

Ok,

Thanks for the info - just a couple More questions. Whats a Libor mortage? Also been onto money supermarket and the options below came up which on the face of it look good - also put the YBS option for comparison purposes..

This is all based on putting down a £25k deposit on a £135k mortage over 25 years with a fixed rate for between 2-5 years initially..

LENDER TRUE COST MTG VAR RATE DURATION INTIAL
TYPE RATE 1.89% MTH PYMTS
Leeds Building Society £36,760 Fixed 5.7% 6.50% 29/02/2008 £565.00 £0

West Bromwich BS Direct £36,824 Fixed 5.7% 1.99% 31/01/2008 £573.87
6.49%

Yorkshire B S £39,124 Fixed 5.9% 4.99% 28/02/2011 £788.41
6.40% (£810-C/BACK)

On the face of it looks like it may be worth switching even if we have to pay the £2500 redemption fee?

Ian_W

Lefty,
If I'm reading it right on the Leeds WEBSITE the 1.89% lasts for 2 yrs but the ERCs [BIG 7% reducing to 4%] last until 2012. What did I say above about really low rates or C/B being paid for later on.
Similar story with West Bromwich HERE the GREAT rate is for 2yrs but the tie-in is to 2011.

Both will cut your payments for 2 yrs but you'll end up stuck on a poor rate for 3 after that unless you pay high penalties which are probably more than the initial savings you make!!

Libor linked are linked to overseas index's - why would you want to link a UK mortgage to an overseas index which you know sod all about? Because it's cheaper, of course. That's what some people thought when they linked to US Libor a couple of years ago since then it's gone up and up and up - they're tied in for another 5 yrs paying more than +1% above the best rates currently available.

TBH mate, no wish to be rude but I think you're clutching at straws with these. Why not go and see a whole of market broker, no fees broker, see what they can offer.

Leftynick

Thanks Ian,

To be honest i didnt have a clue what a libor was and was just being inquisitive - now i know wouldnt touch one with a barge pole! As for the offers i put in my last post - the durations looked to be 3 years as they ended 2008 not 2011.

Really all im doing is trying to get an idea of whats out there, actually have a consultation booked with a friend who works for a broker tonight so see what he says......

Thanks again....