Fixed vs variable, something I've been pondering

MortgageMamma

sorry dont know why i said that thinking aloud. the wine i think.

MortgageMamma

blimey it never posted anyway lmao. Got to stop drinking!

tomstickland

Anyway! What do you think of this?
Portman direct business, 4.24% (SVR - 2.26%).
Portman direct business, 4.35% fixed

I've just looked on Charcolonline: both Portman and Bank of Scotland (via Halifax) are offering 3.99% deals. I've read the details and there's no catches as far as I can see. Halifax website is down at the moment, so I can't read up on it.

I've noticed that rates have moved around since I last looked about 3 weeks ago.

ManAtHome

Most of the forecasts I've seen are for a 0.25% reduction in base rate this year and a 0.5% increase next year - longer-term trends being 5 to 5.5%. Depends on how long the glut of cheap cash is likely to last (borrow from Japan at 2%, lend at 4.5% and cross your fingers on exchange rates etc...). Problem is that worldwide rates are rising which could be a problem for UK providers - if UK rates drop the currency exposure increases.

Personally I'd go for knowing what I have to pay but I've probably been wrong as often as right over the years.

tomstickland

If I can get a fixed rate down in the low 4s then I'll probably match a discount variable after a 0.25% drop anyway. Near enough.

tomstickland

I've just checked the BoS 3.99% deal out. They charge £1200 in fees up front.
However, the lower rate even with the fees still saves £10 per month on the repayment. I'll look at the maths more closely tomorrow - I want to see how much mortgage would be outstanding after the discount period ends.

roswell

DOnt ignore the fact that the USA have just raised there interest rates to 4.75% we will see in the morning what effect this has on the currency market.

tomstickland

Right, just run a spreadsheet on the 3.99 deal with £1200 fees versus 4.39 with £400 fees.

After 24 months I'd have paid £409 more into the mortgage with the higher rate, but the total amount owed with be £666 less. So the 3.99% figure isn't really worth it versus the extra fees.

ads_2

For us the choice of fixed or discount variable was to do with our lifestyle. When we first got married we went for a variable discount as we were both working and could afford an increase in interest rates.

Now, we have 2 kids and my wife isn't working, hence we are skint. We can't afford for interest rates to go up, even by a small amount, so we have just gone for a 5 year fixed with the nationwide. We look at the fixed rate as a safety net rather than losing out if interest rates drop.

These circumstances may not be appropiate to you but it may be helpful to see how we decided.

tomstickland

I'm in the lucky positon where I can afford either option. So I'm going to look more closely at the overpayment, underpayment and payment holiday options and let the fixed vs variable part take a slightly lower priority in my discussion.