Fix or Not? Advice needed

Greenfields_3

We are currently on the SVR with Northern Rock @ 4.79%. We have just finished a 2 year fixed @ 5.79% and our mortgage payments have reduced by just over £100 p/m.

My husband is Self Employed and I am expecting our first baby. Our situation is as follows: Outstanding mortgage of £167,000, LTV approx 83% with realistic property value of £199,000.

I am due to finish work in mid August, the reduction in mortgage payments seems very attractive but I am wondering if it's more sensible to go into another fixed rate before I begin Mat Leave. ( 90% full pay + smp for 6 weeks then half pay for 12 weeks + smp then SMP only)

The best deal I have been approached with is for 5.79% fixed for 5 years with A&L. The arrangement fee is £1600 :eek:, is this normal?? broker has added this to the mortgage amount and our monthly figure is more than what we were paying when we took the original deal with NR, only by £40 a month but I just cant get my head around it.

Any advice or guidance appreciated.

Thanks

beecher

You won't have paid much off the outstanding mortgage in only 2 years, and the £1600 fee will probably mean the money you owe is about the same. The reason the figure you're paying will have gone up is because the length of mortgage will be 2 years shorter than it was, eg 23 years instead of 25.

You have to make a judgement about where NR's SVR will be by the time you go back to work full time to work out whether to fix now, or stay on the SVR. Some think that interest rates will stay low well into 2010, others think they'll rise later this year. It really depends on your attitude to risk. If you do stay on the SVR, then save up the £100/month so as you can afford to pay the arrangement fee upfront.