Do I take the 2 yr fixed rate or go onto Base Rate + 1%??? Help

wissychraddle

Hi there.

My mortgage is currently at 90k, with my house being worth around 115k. I have been on a 5.9% fixed rate but that comes to an end in April. Then, I will be paying the current BofE base rate plus 1%, so 2% if it stays how it is. I have been quoted that my payments will be going down from £600 to £405, saving a whopping £195 a month.

Previously I have been to a mortgage advisor and she negotiated me a 4.39% 2yr fixed rate deal, lowering repayment to £525 a month. This is, however, based on a 75% LTV, which means that the guy who came round to value my house must be generous and value it at 120k. I am still waiting for any news on this one.....

Just throwing it out there at you guys, I know you'd have to be mystic Meg to know what is going to happen with the interest rates but, WHAT WOULD YOU DO?

Cheers

CJ

Trying_to_be_good

Can you afford the tracker rate if Bank rates go up, perhaps significantly? If not, stick with the fixed rate. If you can afford for the rate to rise, and are prepared to take that gamble, take the tracker.

4.3% is a good rate, but you haven't mentioned the fee associated - I guess there is one? You need to factor that into the maths to understand how much it#s relaly costing you over the two years.

beecher

If you're going to jump on a fix, I'd make sure that it was over a longer term, ie at least 5 years. There's no point in getting a two year deal in my opinion. I cant' see it being worth it over such a short term. Also, I can't imagine a surveryor being more generous than you hope - more likely to value it below what you're expecting.

I'd sit on the tracker and jump on a 5 year deal at some point in the future. Probably while you're still less than 80% LTV, so you'd have to keep a realistic view of the value of your house.

IveSeenTheLight

What I would look at is getting a mortgage approval.
I understand these are valid for 6 months.

Then you can sit on the SVR and if the rates start to rise, utilise the mortgage approval at the already agreed rate.

If you go through the 6 month validity without rates going up, then get a new approval to validate you for a further 6 months

wissychraddle

The Booking fee is £549 which is added to the loan, sorry, missed that bit out.

We could afford it as long as we didn't have to go above what we are paying now (5.9%). We were thinking if we did stay on the current tracker, if the base rate showed signs of rising we would jump ship and get a new deal as we are out of the tie-in in April.

Cheers for the advice so far

Fliss_M

I would go with the tracker, over pay the extra to bring you down to 75% and fixed at a good 5 year deal

confused31_2

IveSeenTheLight wrote: »

What I would look at is getting a mortgage approval.
I understand these are valid for 6 months.

Then you can sit on the SVR and if the rates start to rise, utilise the mortgage approval at the already agreed rate.

If you go through the 6 month validity without rates going up, then get a new approval to validate you for a further 6 months

top advice i would do the same myself

jskcv1

If you fixed rate is moving to BR+1% automatically, I'd stick with that, and continute to pay the money you do at the minute if you can afford it, build up a nice overpayment fund whilst the rate is favourable. Then if the rates go up (which I can't see happening anytime soon) then you have some security, also then you can bring down the overpayments to compensate.

If you fix in at 2 years or even 5 years I cant see the base rate increasing significantly in that time to overtake the fixed rate you are looking at, and you'll have paid a booking fee for the privilage....

Depends on your outlook on it, but whilst the rates are low I'd try and benefit from it.

confused31_2

The problem is if you fix for 2 years do you think rates will go up in 2 years??

I personally think rates will start to go up within 2 years, but im thinking 18 mohnths time, and if you are stuck in a fixed deal you will have to wait for it to finish it to get another mortgage.

If you can get a 5 or 10 year fixed deal great, but i would go on the svr and just wait, then when you think rates are starting to go up jump on a fixed rate.

2 years is not long enough, i cant see rates going up much this year if at all, i think you will just be paying for a deal thats going to cost you more money.

whos your mortgage with?

samsuka

confused31 wrote: »

The problem is if you fix for 2 years do you think rates will go up in 2 years??

I personally think rates will start to go up within 2 years, but im thinking 18 mohnths time, and if you are stuck in a fixed deal you will have to wait for it to finish it to get another mortgage.

If you can get a 5 or 10 year fixed deal great, but i would go on the svr and just wait, then when you think rates are starting to go up jump on a fixed rate.

2 years is not long enough, i cant see rates going up much this year if at all, i think you will just be paying for a deal thats going to cost you more money.

whos your mortgage with?

Agree with this. You are much much better to go on the SVR +1%, thats a fantastic rate. Mortgages are only going to get better as the BOE rate continues to fall, and as the government encourages lending. You will be able to fix at 3% on a 2 or 5-year deal before the end is over, so why bother going onto a more expensive fixed rate. Interest rates are unlikely to rise until 2010 as the BoE doesn't expect inflation to rise above 2% in that period

beecher

Not sure that there will be 5 year fixes at 3% - I think 4% will be closer to the bottom for them. But other than that I agree with you.