Which 5 year fixed to go for?

sec79 · 1 March 2009 at 8:59PM

My current 5 year fixed mortgage with Alliance & Leicester finishes at the end of June. I don't know if I'm being premature by looking now, but have seen the 5 year fixed offered by HSBC rate of 3.99% and wondered if this was one I should reserve now?

I don't know if other providers will offer similar rates if the interest rate goes down again.

The arrangement fee for the HSBC one is £999, and as I only have a small mortgage (£50,000 over 20 years, salary £20k, house worth £110k) I don't know if there are other mortgages which would be more suitable? Grateful for any advice
thanks

beecher · 1 March 2009 at 10:19PM

It is a big fee for a mortgage of that size, and is what is putting me off booking it. You could be better off sitting on the SVR for a while, or at least waiting to see if better deals come up between now and June.

sec79 · 2 March 2009 at 7:08AM

A&L's SVR is 5.09%, which is the same rate as my existing fixed so I could sit on that for a bit.
This is the first time I've remortgaged so am clueless on what to know is a good deal or not. Most mortgages seem to have a fee of about £1,000, by the time you take into account arrangement, legal and value fees.
I know I want a fixed deal, with no overly high ELRs, ability to overpay, a good ihnterest rate and not too high set up fees. but I guess that's what everyone wants.
The mortgages with lower set up fees have a higher interest rate, and it's knowing how to work out which is the best one.

isayoldchap · 2 March 2009 at 7:29AM

I wouldn't always look at the rates.Do the sums.The SVR for A&L has reduced to 4.99% but this is still high against other lenders.
I am with them on a fixed.I am not an IFA

If you opt for another fixed rate then multiply the months by the amount to pay per month and if necessary add the booking and arrangement fees etc.

Then look at the no fees one.Do exactly the same calculation.
You maybe quite surprised especially as the amount you require is small.

It sometimes pays not to pay the fees.What could that money be worth to you in say 3-5 years?Is it worth being tied in?

Oh and remember some will allow survey and solicitors to be free.But watch out if you don't stick to the fixed term.You will be charged these and the %.Early Repayment Charge.

I would ask to speak to a whole of market IFA just to see what 's really out there .They will have special rates from them.
More on here from Martin.
I would be reluctant to go with their life quotes though as they usually are huge because of commissions.Good tips on life cover against Martin's thread.I would also not want to pay a fee.Never commit and do your homework after you have received the relevant information from them.Remember not to rush in until you have looked at the small print.So take it home without signing.
Of course you could also take some rates in to compare against theirs.You won't have all the best deals for you.
I have had a mortgage done from an IFA in an estate agent without any charges and the rates were as good as what was on offer direct.

Good luck

m_13 · 2 March 2009 at 8:56AM

If you want to overpay then the HSBC five year fixed may not be for you as you are restricted to overpayments of 20% of your monthly payment each month. So if your standard payment were £100 then you could overpay £20 per month and that's all.

Most fees can be added on to the mortgage so would you owe the amount you borrow plus the fees. I would then use the Karl Jeacle calculator to work out how much the mortgage actually costs over the term.

A £50,999 mortgage on the 3.99% fixed rate over 20 years will cost you £308.78 a month during the fixed period. The maximum overpayment will be £61.75 a month. If you paid that every single month then the mortage will end 4 years and 7 months early and save £5,810.23 in interest you would have otherwise paid.

If you can afford to pay more each month then why not go for a reduced term in the first place? If you have the mortgage over 15 years instead of 20 then your monthly payment will be £376.98 during the fixed period (£68.20 more) and you can still overpay 20% extra per month if you want.

If A&L's SVR stayed at 4.99% for the entire five years - very unlikely I know - then the monthly payment would be £329.70. That's £20.92 more than the HSBC payment each month. £251.04 more each year and £1,255.20 extra over the five year fixed period. If A&L's SVR goes up above 4.99% during the five year fix then the savings by fixing with HSBC will be more but if it goes down then the saving will be less.

It's worth talking to a whole of market IFA and getting fee-free advice. You can then look at each of the fixed mortgages separately and see how the figures stack up.