A&L 1 Year Fixed Deal

BudgetDude

Hi all,

This is my first post although I've been following a few threads recently and I was just looking for a bit of advice as their seems to be some very knowledgeable peeps here.

We have been with A&L for 2 years on a 40 year mortgage which we decided to take as it gave us low-ish repayments and we knew that when the kids are both at school we can make overpayments to reduce the term once my partner is able to work more than part-time. Problem is we didn't see a complete crash coming and although we borrowed at about 92% LTV so we could make improvements to the house, we are now looking at 110% LTV causing negative equity.

We are due to come out of our 2 year fixed rate in June and have been in talks with A&L who could only previously offer interest only or onto their 4.99% SVR, interest only isn't attractive as we wouldn't be chipping away at the equity and would need a repayment plan in place which would mean that we wouldn't save any money anyway.

Anyway, we popped into our A&L local branch yesterday to see if there was anyway of fixing our rate as we need to be able to budget so that we know exactly what are outgoings are each month and they mentioned that they have just bought out a fixed rate deal for those in negative equity but it is only for 1 year and the product fee is £599 upfront at 4.99%!!! I explained that I thought that was extremely bad value for money particularly as we've never messed them around but they assured me that was their only fixed deal for our position at the minute.

Now much as I'd like to decline I find myself leaning towards this as it means that I can budget accurately for another year and if interest payments go up even 0.5% then I would be paying £600 extra a year on my mortgage anyway if I was to stay on their SVR. I would also be saving around £120 a year for this 4.99% deal.

They are sending the paperwork through and it is up to us wether we choose to take their offer which is valid for 14 days.

Any thoughts?

Sorry about the essay.

acs202

Hi I know exactly where you are coming from.

We are in a very similar situation regarding the A&L mortgage. I think their SVR is despicable and the offer of fixing for a year @ £599 also seems criminal. I can assure you that they offered us the exact same deal.

This is a slight improvement from 1 month ago where they wouldn't offer anything other than the SVR. My own personal decision is to ride the SVR (around £40 cheaper for us per month) and hope the interest rates stay lower for a while. I think the £599 fee uprfront is very expensive and my own guess is that won't be recouped through savings on the interest rate.

However, I am no expert but just providing my own thoughts.

Any help?

riles

Bump to keep this up the page for purely selfish reasons

I almost wish I hadn't seen this 'offer' as it really feels like a gamblers bet. £599 to fix my rate for only a year does seem excessive, but the cost of a 0.5% increase in SVR will be about £100 a month. So do I feel lucky?

A&L have a high SVR and were slow in bringing it down (only 0.5% cut spread over 3 base rate reductions). However, their maximum LTV on this is 150%. They have no need to try and keep these customers as they are all pretty much stuck for years at that level, so are A&L saying internally that they don't think base/SVR is going up anytime soon?

Alternatively, they have said that this offer is the first time they have had a fix for negative equity (indeed, this offer apparently started off at 90% LTV) so are they now banking on house prices stabilising, and seeing lower risk exposure... i.e. could this offer continue (albeit at varying fixes) in the coming months.

Grrr, sorry for the stream of conciousness, but I too would like to hear some views.

On the other hand, I'm going to vegas in the autumn, and I'll no doubt lose a lot more than £600...

acs202

To the person above going to Vegas...

Stay in the Venetian its truly amazing....and as its a money saving forum make sure you print off lots of vouchers before you go. We went a couple of weeks ago and the amount of buy one get one free's you can get through google is unbelievable.

Sorry for off topic message!

robbiecaratiger

Same here. Our 2 year fixed at 4.99% with A & L ends soon & we've been offered 1 year fixed at 4.99 paying £599.00 for the privilege of that, or going on to their SVR of 4.99 in a few months.

!!!!!! that. I'm off for a new deal elsewhere.

BudgetDude

Thanks for the replies.

I've pretty much resigned myself to taking this deal as it's the only way I can keep an accurate track of my finances. I'm still pretty bitter at paying this for a 1 year fix as it seems to me that they're milking customers who are locked in with them due to high LTV's. I imagine there will be yet another fee to fix again next year which strikes me as quite an underhand way of exploiting their customers in negative equity.

If I knew then what I know now I wouldn't have touched them with a barge pole...

Oh and thanks for the Vegas coupon advice!

acs202

Just a quick note. The latest Bank of England report predicts that interest rates will stay at 0.5% well into 2010.

You might want to do some form of breakevem calculation to see if you think the fee will be repaid in savings as a result of unchanged interest rates.

Just a thought anyway. Im sticking with SVR until 2010 but like everyone says its a gamble!

riles

acs202 wrote: »

Just a quick note. The latest Bank of England report predicts that interest rates will stay at 0.5% well into 2010.

You might want to do some form of breakevem calculation to see if you think the fee will be repaid in savings as a result of unchanged interest rates.

Just a thought anyway. Im sticking with SVR until 2010 but like everyone says its a gamble!

It is indeed fortuitous timing by the BoE. It has certainly pushed me towards 'wait and see'

BudgetDude

acs202 thanks for that, I had a look at a few articles and it certainly does look like interest rates will freeze for some time, I'm now more tempted to ride the SVR for 6 months and then look at what fixed deals they are offering then.

My only real concern with that option is the gamble that they are still offering high LTV fixed deals in 6 months time and knowing A&L anything could happen, so I'm still a bit unsure which way to go.

riles

BudgetDude wrote: »

acs202 thanks for that, I had a look at a few articles and it certainly does look like interest rates will freeze for some time, I'm now more tempted to ride the SVR for 6 months and then look at what fixed deals they are offering then.

My only real concern with that option is the gamble that they are still offering high LTV fixed deals in 6 months time and knowing A&L anything could happen, so I'm still a bit unsure which way to go.

Alternative view is, if rates start going up a little earlier than anticipated (say, March 2010) then they will have already started rising when you come out the 12 month fix in July 2010, and so any deals at that point may be pricier than ones which may be around, say, at the end of this year. Essentially, deferring your fix until christmas may get you the best of both worlds.Or it may not . But thats my current plan.

BudgetDude

Just a quick update.

We decided not to take the original deal and the Mrs spoke to A&L a few hours ago and they've taken the 1 year deal option away now anyway (which I expected).

They're now offering -

1.5 year fixed at 5.49% no product fee
2.5 year fixed at 5.99% no product fee

Their SVR is 4.99% still.

Well this is better than their last offering so I'm pretty pleased considering our negative equity.

We've decided to take the 1.5 year fix as the 2.5 year fix would make the budget pretty tight and hopefully house prices will have moved upwards a bit by the end of the deal giving us more options.

Anyway, just thought some of you might be interested.