What is the best mortgage deal to go for?

Holeinone_2

My son bought a flat in London 2 years ago. The fixed rate mortgage has come to an end and he is now paying a variable rate and saving almost £300 per month. He has asked my advice as to whether he should stick with this variable rate or seek another fixed rate mortgage. He has done some searching and has been told that it would cost him £100 more than he was previously paying. What should he do?

Conrad

Hole

Your post could be likened to someone asking - 'whats the best 2 week holiday' without any further info. Well, the answer would be impossible without knowing some facts first.

For a start the value. He bought right at the peak. All people seem to think thier property somehow hasn't come down in value but I guarantee you it will value at about 20% less. If it was a newbuild it could be 50% less (seen many like this)

So does he owe £1 or £1,00000? Is the REAL value higher than the mortgage? Does he plan to move home? His basic income? His outgoings?

That will do to start

steve237

Holeinone wrote: »

My son bought a flat in London 2 years ago. The fixed rate mortgage has come to an end and he is now paying a variable rate and saving almost £300 per month. He has asked my advice as to whether he should stick with this variable rate or seek another fixed rate mortgage. He has done some searching and has been told that it would cost him £100 more than he was previously paying. What should he do?

Hi,

Nobody really knows how interest rates are going to play out over the next few years, but many are fixing now (and paying a bit more every month as a result) to have the piece of mind that when the base rate does increase, they don't have to worry about it. As base rate is 0.5%, of course the only way is up.

I just fixed for 7 years at 5.39%, but my SVR was 4.24% so I'm not paying that much more really. But if your sons variable rate is 2.5% or something like that (and many are), then it would be quite a jump if he fixed.

Also, if he does decide to fix, longer term ones are the way to go. No point in paying extra for a 2 year fixed rate, only to come off it when rates are high and less good deals available (in my opinion)

Holeinone_2

Thank you both Steve and Conrad,

The flat he bought about 2 years ago is in London and it cost £250,000. It is not a new build. He is currently renting it out (with approval) and is renting a house outside of London - the rent he receives is covering his mortgage payments. His salary is £50k with £10k bonuses. Not sure what his outgoings are except I think the rent for his house outside London is about £825 per month.

_Andy_

If he is currently renting it out with consent to let on residential rates it's unlikely he's going to be better off with another lender as he'd then be looking at buy to let rates.

dimbo61

If your son rents out the flat for more than 2 years he might have to pay capital gains tax when he sells !!
He needs to see an accountant RE tax situation.