Nationwide BMR or fix - how to decide? Thoughts please

apples1

Please could someone explain what are

Base Mortgage Rate

Standard Mortgage Rate

Standard Variable Rate

I have a 5 yr fix with Nationwide which ended last month. Now reverted to it's the BMR. I have seen something that I think said that the BMR is better than most SVRs. Their website also talks about SMR - is that the same as a SVR? I'd like to know what the differences are for my own general knowledge and because I have two firm offers for new 5 year fixes (with NRock and Natwest) and I am sitting tight for a month or two as they are valid for 12 weeks. Just starting to wonder if maybe I should stay put on the BMR if it's something good?!!

The offers I have are for 4.69% for 5 years. The BMR I have just moved onto is 2.5%. What would the Bank of England base rate have to go up to before I would have been better off fixing at 4.69%? Is that likely? I do appreciate you don't have a crystal ball but what is the current thinking? I have £180k mortgage and over 40% equity.

Trying_to_be_good

Nationwide's BMR is pegged at a max of 2 percentage points above Bank of England Base Rate (currently 0.55, making the BMR 2.5%).

BMR has, historically, been Nationwide's Standard Variable Rate (SVR), they just called it a BMR instead.

The 2 percentage point guarantee is, however, costing Nationwide a fortune, but they don't/won't/can't break that guarantee. So for new Nationwide mortgages, they'll revert to a new rate called the Standard Mortgage Rate, SMR.

If Nationwide keep the BMR at 2 percentage points above base rate, the base rate would have to rise to 2.69% (would be 3% instead as they always go in half-point steps) for the fixed rate to be cheaper. But the real question is how high could you afford it to go? What's that security worth? That's how you have to make your decision!

apples1

Thank you for the explanation. I have changed thread title to reflect my new question....

Trying to be Good -Well the fix that has just ended was at 5.29% and we could afford that. I could afford £1500 per month over that and it would start to hurt.

I really want to pay off mortgage asap. I reduced the term a year back to up my monthly payments so have paid £1400 ever since and will contunue to do so on the BMR.

What do you think? I don't expect there are many people who could afford to track the base rate whatever it went to are there? What is a likely worse case for the base rate in next five years? If it went off the scale surely so many people would be screwed that the economy would be ruined (again)? If the worse case did happen could I "borrow back" my overpayments to pay the extra each month?

I realise that if the rates went right up I there won't be good fixed deals around but I would be free to jump off this BMR at anytime without penalty.

Thoughts and opinions really appreciated. The more I have to reflect on the better.

Trying_to_be_good

Base rates are historically around 5%, so SVRs around 6.5% to 7%.

Personally, I'm coming off a ludicrously low tracker for a couple of reasons - horrendously poor customer service with continual mismanagement of the account, plus wanting the security of a fix. I'm opting for a 5-year fixed offset - so I can effectively overpay as much as I want into the offset account, and have immediate access to it. I can also over 10% per year (and not have access to it), should I want to do this.

Not sure on access to Nationwide overpayments - the website says 'conditions apply', so you can borrow it back in at least some circumstances.

Lynn11

We nationwide you are able to claim back any overpayments you have made, if times are hard or ask for holiday payments or reduce your monthly amount - since you have overpayment money in the pot. We are with nationwide and is on the SVR on June and July but have secured a fixed deal with nationwide to start in August - so that we know what is coming out of our bank each month and we got a reasonable good rate, which has now been pulled from their website. You know that with any fixed deals with nationwide you can overpay maximum £500 every month, but there is someone on this forum who overpay £500 and then overpay another £100-£200 more and has not been charged for this but do you want to risk it. You know that you can shortened your term free of charge from nationwide if you are reaching your overpayment £500 limit.

uzubairu

Lynn11 wrote: »

We nationwide you are able to claim back any overpayments you have made, if times are hard or ask for holiday payments or reduce your monthly amount - since you have overpayment money in the pot.

You know that with any fixed deals with nationwide you can overpay maximum £500 every month, but there is someone on this forum who overpay £500 and then overpay another £100-£200 more and has not been charged for this but do you want to risk it. You know that you can shortened your term free of charge from nationwide if you are reaching your overpayment £500 limit.

It's me.

We've reduced the term a few times (standard payment is now £291 more than original), and know that that money can't be accessed once paid in.

With the rubbish interest rates on offer for our emergency money, we thought we might try and channel some of it into the Overpayment Reserve because we'll pay less interest whilst we don't need it, and we know that we can get that money back quickly if we do.

Overpayment of £950 last month, and already paid in £789 so far this month. Year To Date we've added £5200 to the pot even though we are only allowed to add £3500.
It's a risk we're happy to take (we've been overpaying £500+ since last September with no fees/charges applied).

If you stay on the BMR you can overpay whatever you like, and that should give you a buffer (and improve your LTV) when rates start to rise.
Obviously, the best fixed rates won't be available then, but IMHO rates aren't going to rise too much in the next year, so you don't need to rush into anything as your current situation is rather favourable.

belfastgirl23

I'm sticking with the BMR when my fix ends this month. That said I'll keep an eye and if the fixed rates come down again I'll think seriously about going for a 5 yr. According to Martin and to some others, fixed rates may be on their way down again so I'm prepared to take the risk and hope for the best The fix I'm coming off is 5.47 anyway so not much to lose at the minute.

I'd say hold your nerve unless you would be in dire straits if the fixes go up.

Don't forget you can reserve your fix up to 90 days in advance and benefit from the bmr in the meantime.

uiop123uiop123

When you reserve a fix rate deal, correct me if I'm wrong but don't you have to go through a credit check?

JayZed

I'm sticking with the BMR for now, but mainly because I'm expecting a little windfall in a couple of months which should allow me to bring the LTV below 60%. At that point I'll start looking around for some good fixed rates, but won't be in a desperate hurry to fix.

Phoenix-1

Apples1 - this could be me writing this as I'm practically in exactly the same situation as you. I'm very tempted given all the latest predictions for interest rates to stay at 0.5% well into 2010 and the fact that the LIBOR rate has decreased to defer on my Northern Rock 5-yr fix and ride out the 2.5% BMR. What I've done is work out the difference between paying the Northern Rock rate and the Nationwide rate until June next year and it's a saving of nearly £1,500 overall. The difference each month is around £155, so rates would have to leap up for me to lose out. Also I'm overpaying Nationwide, a feature we have with the Northern Rock offer.

My gut feeling (having never had a fixed rate mortgage before) is to defer the offer (nearer the expiry time) and see what else emerges as there may be better offers around or at least equal offers. However, I now have to convince my partner (who is risk averse) and need to consider the benefit of lsoing an offer with very flexible overpayments which the NR offers as part of this deal which no others seem to come near.

Best of luck with your decision!

Radiantsoul

Assuming you have 20years to go, you can accept interest rates of 7.5% before it hits £1450 per month. That means a base rate of 5.5% or fixed rates being quite a bit higher.

If you stick with the 2.5% variable you are currently paying about £950 and so would reduce the mortgage by about £450 per month if you overpay as you have been. Moving to fixed rates would increase your payment to £1150(plus there might be an arrangement fee).

If I were you I wouldn't fix as interest rates are unlikely to rise over the next 6months and the flexibility to overpay has value to you(although you can overpay £500 per month with NW). You have a decent cushion for rate rises the benefits of not fixing are quite high...