At the end of my fixed rate, What should I do?

bma1208

I am currently on a 3 year intrest only fixed rate paying £949 per month. At the end of this month it changes to a repayment mortgage and the interest rate drops to 1.5% tracker at 1% above base. Meaning I will be paying £838 per month repayment. I have been contacted by the bank asking I I want to fix the rate for another 3 years at 3.99% (this incures a set up fee).

What do I do:

Stay where I am at the moment and use my option to overpay and keep paying £949 per month thus overpaying by £111 per month while the rate is low?

Fix the rate for another 3 years?

Thanks for your advise

Bma1208

beecher

Depends on your Loan to Value - if you're close to hitting 60%, 75% or 90% then I'd fix. Are they offering a 5 year deal?

bma1208

With the current house price situation I am probably closer to 100%. Not sure about the 5 year deal I will ask.

beecher

If you're close to 100%, I'd personally jump at the chance to fix, but definitely ask if there are longer deals available. Overpaying by £100/month is going to make very little difference to your LTV and you run the risk of them pulling deals for anyone over 90%. The gamble you take is whether base rates rise above 2.5% in the next 3 years - I'd think they definitely will, but no-one knows for sure.