How long to Fix for?

Pete111

Hi

I have a flat that I am renting out and my previous 5 year fix with A&L comes to an end at the start of May

My options re remortgaging have been limited by the crash and the difficulties in getting a realistic valuation from a surveyor (drop from August 07 was reckoned to be over 30% in Dec 08 - ouch!) but on the plus side A&L have confirmed that they will offer me another residential rate even if I continue to rent the flat as I used to live there.

A&L have some reasonable, though not market beating, fixes on the market and I should still be able to summon up 25% equity.

My question to the board is therefore re the length of the fix. I want to continue renting the flat out in the short to meduim term (or until the market comes back.) I'm making a 20% profit after tax so that's all good but I would love some advice whether I ought to take the 3 year (4.79%) or 5 year fix (4.99%) both with a £600 fee

My view is that I will consider selling when the local property market has got back to 80%+ of the recent peak. The flat is in Wimbledon and is a good quality period property with a private garden so should be reasonably well placed to take early advantage of any London rebound

Thoughts appreciated!

mbga9pgf

Pete111 wrote: »

My view is that I will consider selling when the local property market has got back to 80%+ of the recent peak. The flat is in Wimbledon and is a good quality period property with a private garden so should be reasonably well placed to take early advantage of any London rebound

Thoughts appreciated!

:rotfl::rotfl::rotfl:

you are going to be waiting a little while sonny jim!

Tim_Nicholas

Can you not stay with your current mortgage and fall on to the variable ? Thats what I am thinking of doing..

mbga9pgf

i personally am looking to fix for as long as possible.

Well, 10 years at least. View to pay mortgage off once fix lapses.

Pete111

Thanks for the constructive advice mbga9pgf....

Whilst I fear you may well be right, I will console myself with the 20%+ return on the rental. Should be worth a couple of decent holidays per year...

I'm veering more towards the 5yr fix it has to be said. I'm not looking to go onto the SVR if I can avoid it - it;s currently just over 5% and A&L have a less thank perfect reputation in this area

clutton_2

you need to factor in the costs of moving a mortgage elsewhere, and compare them with the costs of staying with your current lender

add in survey fees, solicitors costs, early repayment fees if any, closure fees if any, deeds fees if any etc etc

when i have done this in recent months, i have stayed where i am and changed to SVR as it has been cheaper than moving

Pete111

Done that.

Given I could only get a BTL mortgage elsewhere, A&L are by far and away my best bet re rates and fees. They surprised me somewhat by offering me another residential rate rather than a (far) more expensive BTL rate & have confirmed they will continue to allow me to rent the flat for a yearly £99 fee.

I did look at swallowing teh cost of a BTL mortgage and drawing some equity out of the flat but given the new value of teh property the money I could draw out was not sufficient to offset the massive extra cost (1%+ higher rate + approx 5k extra in fees)

I guess therefore the nub of the question is how long the slide downwards is likely to last - I'm inclined to think that within 5 years we should be on the way up again so am edging towards fixing for that period rather than the more optimistic 3 years but am interested in opinions for the London Market which will move upwards first when a revival happens - and it will happen at some point. (be it 3, 5 or 10 years)

paulsin

I would guess that you should either fix for 2 years of 5+. I think rates will stay low for next 2 maybe 3 years, but they will rocket in 3-6 years, steading by 7 or 8 years. Its a guess, but if you think about it its nots a crazy guess. There is still a housing shortage, people are still wanting to buy but can't get credit, as soon as credit comes back, I really feel house prices will go up uncontrollably, however unlike last time, I think the bank will raise the rates much quicker and higher to bring the prices down, rather than waiting for the banks themselves to screw it up.

MX5huggy

In a similar situation myself 5 years it is. In 3yrs I think rates could be all over the place trying to control inflation.

As you say A+L's SVR is rubbish.