Should I go onto my bank's standard variable rate?

rebeccak

My mortgage deal ends in June and, at the moment, if I get another fixed term deal, I'd have to pay significant arrangement fees etc in order to get a rate which is *worse* than my bank's standard variable rate. Therefore, I'm thinking of avoiding all the costs of getting a new mortgage deal and just go on to this lower, standard variable rate.

Is this a sensible option? I know in the past the importance of getting a new deal before your current one ran out was always emphasised but the the mortgage market has changed a lot since then (plus, as I bought at the peak of the market, my loan to value rate will have plummeted so I'd probably get a worse deal). What are the disadvantages or risks of doing this? Would you recommend it?

Robert_Sterling_3

It all depends on what the alternatives are and what your priorites are.
This is a way of saying that we have not enough facts to go on.

Metranil_Vavin

I'm thinking of doing something simillar in November when our FR mortgage term ends.

We are paying 6.24% I think at the moment, so pretty sure it makes more sense to go onto the SVR come then.

I have to admit though that mortgages are not my forte! One of the reasons I've always gone for a fixed rate in the past.

Forever_Red

rebeccak wrote: »

My mortgage deal ends in June and, at the moment, if I get another fixed term deal, I'd have to pay significant arrangement fees etc in order to get a rate which is *worse* than my bank's standard variable rate. Therefore, I'm thinking of avoiding all the costs of getting a new mortgage deal and just go on to this lower, standard variable rate.

Is this a sensible option? I know in the past the importance of getting a new deal before your current one ran out was always emphasised but the the mortgage market has changed a lot since then (plus, as I bought at the peak of the market, my loan to value rate will have plummeted so I'd probably get a worse deal). What are the disadvantages or risks of doing this? Would you recommend it?

What is your fixed rate at the moment and who are you with?

Burnley_Lad

I'm considering doing the same when my fixed rate with Nationwide ends in July 2009 - I'm currently fixed at 4.98% - Nationwide's SVR is currently 2.5%.

rebeccak

Forever_Red wrote: »

What is your fixed rate at the moment and who are you with?

I'm with the Bank of Scotland and my current rate is about 5.5%, due to end in June. They seem to have recently updated their mortgage section for existing customers so the information isn't the same as the last time I checked. The site says that you have to ring them to check the standard variable rate but elsewhere it gives a 'Bank of Scotland Home Loan rate' as 4.84% so I'm not sure if that is the SVR (but why not call it that, if it is?)

I'm not sure what my LTV rate is at the moment. I used the Nationwide calculator and based on that I think it's just over 70% - although I've read that if I go to a different lender they'll probably value it more conservatively. My mortgage is around £62,000 and my current minimum monthly payment is £400 (I choose to overpay and want a mortgage that lets me overpay to a reasonable degree without penalty). I don't know whether it's worth it for me to pay a fortune in charges to move to a different lender if the difference in rates isn't that big.

bigw81

Lots of things to think about - not just for this time round, but for future rate ends. Bank of Scotland will let you move onto a 'retention rate' ie: they'll allow you to simply move over to a new rate with their company, without carrying out credit checks or evidence of your income etc. That can be a very valuable thing nowadays - there are many many people out there who WANT to get another rate but can't - they are stuck with their lender on their SVR because they can't remortgage elsewhere due to a poor credit history, insufficient income or too high an ltv. Don't think it couldn't happen to you - that's what everyone else thought until house prices started to tumble, jobs were lost etc. The ability to always move onto a new rate (fixed/discounted, whatever) at the end of your existing deal means you're 'future-proofing' your mortgage - you won't need to scrabble around looking for a sub-prime mortgage at extortionate rates if your credit history isn't too great in future.

Forever_Red

If you go to the Bank of Scotland website it directs existing mortgage holders to the Halifax website. It's SVR is currently 3.5% so I think your mortgage would revert to this rate when it runs out in June. The Halifax are offering fixed rate deals but they aren't fee free.

I would wait and see what other deals come out in the next couple of months before trying to secure a fixed rate.

Alan

MrC-117

I can't see rates going up much this year and the fixed rates seem to be too high to me (with large application fees), so the SVR probably isn't a bad idea. As the market gets better the banks might start offering some decent deals again.

Obviously the risk is that interest rates go really high so it does depend on your circumstances whether you think it's worth the risk or not.

I wouldn't worry about finding a fixed term yet. Give it a few months at least, and keep an eye out for any mortgages that fit your needs (like if you want to overpay yet or not, and how long you might like to fix etc).

dunstonh

By the time you realise that you should be on a fixed rate you would have already missed out on the best deals and fixed rates would have started to rise.

You buy a fix to give you certainty of payment. Not to get you the best rate at that moment in time. You have to decide if the risk of a variable rate is worth it or if you prefer certainty.
You cant do anything until about 12 weeks before the deal ends so you have time to see how things are going.