Is this a good deal or not?

Aiadi · 28 March 2006 at 5:12PM

I have been searching for remortgage deals myself for the last few days. I have left my details with several brokers (moneysupermarket/L&C etc) but so far nobody has contacted me back, so I thought I'd see what you guys think of this deal:

£116,470 to remortgage. Currently with Abbey at not so great 5.5% variable, paying £770 per month, repayment mortgage.

Found a deal with Nationwide; base rate tracker (0.29%) above base rate for life of mortgage (22 years). So rate will be 4.79% until base rate goes up. Costs £500 to set up. Flexible with overpayments, underpayments, portable etc. Also I can switch to fixed mortgage with the same company at any time without early repayment charges.

Only problem is there is hefty early repayment charges (5% 1st year, 4% 2nd year, 3% 3rd year, 2% fourth yr, 1% fifth year). I am slightly worried that if interest rates go up this deal will become uncompetitive, although I can afford about 2% rate rise quite easily at the moment. Should I be worried about:

1. I am in effect locked in to Nationwide for 5 years.

2. I will definitely want to move house within 2/3 years and get a bigger mortgage of probably £300,000- I will have to move this mortgage with me or face huge early repayment charges, therefore I will be at the mercy of Nationwide-they will decide how much loan I can get based on my salary- what if they decide to be stingy and don't offer me good salary multiple?

Barney088 · 28 March 2006 at 11:35PM

Is it a good idea, any answer to this may constitute advice but you may well have answered your own question.

As you will "definitly move...." you will need a larger mortgage. Nationwide will not (I'm fairly sure) guarantee to lend you the money, they will not guarantee to let you have the money on the same rate etc...

As such you will be obliged to pay them to leave the deal. If you are certain to move try looking for a 2/3 year deal (2 year is more common) and then you'll be penalty free to shop around. A £300K mortgage will attract some special treatment from some lenders.

Enjoy your dilema!

Aiadi · 29 March 2006 at 12:21PM

Barney088 wrote:

Is it a good idea, any answer to this may constitute advice but you may well have answered your own question.

As you will "definitly move...." you will need a larger mortgage. Nationwide will not (I'm fairly sure) guarantee to lend you the money, they will not guarantee to let you have the money on the same rate etc...

As such you will be obliged to pay them to leave the deal. If you are certain to move try looking for a 2/3 year deal (2 year is more common) and then you'll be penalty free to shop around. A £300K mortgage will attract some special treatment from some lenders.

Enjoy your dilema!

Thanks barney, sounds like I did answer my own question, I guess it's the lure of the low rate that's making me ignore my true feeling that being locked in is not a good idea. I have also found another base rate tracker + 0.49% with no ERCs and is portable (Principality and HSBC both do it)- although the rate is higher than the Nationwide mortgage, I think the flexibility of being able to move to another lender may outweigh the risks of nationwide's one.