Tracker mortgages - will you keep paying the same when interest rates drop?

ailuro2

OK so it's not the most likely qustion for a Sunday morning sitting eating my toast at the pc but this question popped into my head...


I was wondering.....how many people are keeping their mortgage payments where they were before the interest rate cuts??


I reckoned if people who took out a tracker rate a couple of years ago when they first bought their average priced house at £160,000,

kept their payments the same instead of keeping the extra money, going from a BofE rate of 5.75% in 2007 to , say, 1.99% (if their tracker is a plus 0.49% BoE)

they could pay off their mortgage over 8 years early and save themselves nearly £14,000 :j

Assuming of course interest rates stay the same.

If they go up again then there is no shock at having to pay the higher mortgage payment again.;)

http://new.egg.com/visitor/0,2388,3_54988--View_1028,00.html is an easy to use [age where you can do your calculations...

Or are more people putting the money into higher interest savings account, or are they using it to pay off other loans? Just wondering...:p

Frugal_Moose

I have decided to overpay more than my original payments. We are fortunate not to have any other debt and so are concentrating on shrinking the mortgage whilst there is less interest being charged to the account.

tattoed_bum

I would have loved to have done this but unfortunatly my dh has had his hours reduced to 24hrs a week instead of his usual 38 hrs a week so the huge difference in wages is making it impossible to do so .

i would imagine this will be the same for many more families at this time

Kez100

We have increased our payments as well. We have an offset so its savings really but we wanted to build a buffer to help if we lost our incomes. The idea is to get at least three years annual payments in there so we could take a mortgage holiday if we needed too. If not needed we have effectively reduced the term.

lana22

We have kept the payments the same plus £50. So we are overpaying quite significantly.
I am not sure how much equity we have paid off (been in the house less than a year), but I am pretty certain it will reduce the term. This will be great for us as we were only 23 when we got the mortgage, so we will hopefully be mortgage free at a young age.

nick1977

I've let my payments drop with the interest rate falls. Not having much savings and owing a bit of money to family (which fortunately they are not worried about, but I am!) I would prefer to have the money where I can get at it easily.
Also I am looking to rent out my mainsonette in May, and 12 months later possibly buy a new family home. I would like to port my lifetime tracker to the new home with as much owing on it as possible, as I doubt any additional mortgage I need to get will have such a favourable rate!

Nick

Smithills

I've done a bit of both. I'm overpaying £85/month, but am putting more into savings- my tracker is paying off, currently at 1.89% (:j) and I can get more on my savings accounts. As I am doing up my house and need money for carpets, furniture etc, then I figure that for now, I'm shifting my emphasis to saving.

Though I suppose that OP's are also a different way of saving too- as I'll never have to pay interest on that £85 again

ailuro2

nick1977 - you will se from my sig that we are fans of overpaying - mortgage free before I'm 40 if all goes well.:D

We overpaid the mortgage, but put it into an overpayment fund rather than taking it off the balance permanently, so that when we wanted the money we took it out and the original mortgage balance returned back to where it was before the overpayments were taken into account.( We only paid interest on the real outstanding balance when the overpayment fund was there, so it had exactly the same effect as taking it off the balance for good)

nick1977

ailuro2 wrote: »

nick1977 - you will se from my sig that we are fans of overpaying - mortgage free before I'm 40 if all goes well.:D

We overpaid the mortgage, but put it into an overpayment fund rather than taking it off the balance permanently, so that when we wanted the money we took it out and the original mortgage balance returned back to where it was before the overpayments were taken into account.( We only paid interest on the real outstanding balance when the overpayment fund was there, so it had exactly the same effect as taking it off the balance for good)

That's good. I'll have to check if that is an option with mine! Would make even more sense if the BOE drops rates again this week (which seems to be the general consenus atm)

Nick

ailuro2

check if your tracker has a collar or not. Hopefully not, I think it's a more recent thing when banks realised interest rates might just go as ridiculously low as they are now...

p.s. Well done for making repaying your family a priority - swift repayment usually means the money is available another time.;) no bad thing in the current climate.

nick1977

Yep it has got a collar, that's why I'm on 2.29% instead of 1.79%
Still, I don't resent this as the collar is supposed to be 2.75% and I agree that it is in the interest of all Nationwide members not to waive the collar any further.
As for the family repayment, I totally agree. It is my Grandad who lent it to me, and he is in no hurry for it, being comfortably off. I told him I'm saving in in an ISA to pay him off which he's happy about as he has maxxed out his ISA allowance, and he knows it's there for me to use if I need it in an emergency.
If I had nothing to show after borrowing it 18 months ago it may be a different story!

Nick