A&L New products released

acs202

Hi all,

This is partly for others info but also asking for some advice. We bought our new build flat in the peak (summer 2007) and had a fixed mortgage for 2 years.

Having come to the end of this have now reverted to SVR clearly very high at 4.99%. As we are viewed as negative equity there had been little option but to rever to SVR but having phoned a number of times there ar the following new products.

Option 1 - Fixed for 1.5 years @ 5.49 with no fee

Option 2 - Fixed for 2.5 years @ 5.99 with no fee.

Now currently I am overpaying by £200 a month on the SVR. Should I continue doing this to reduce the capital elements. I appreciate it could be a gamble as it is widely expected base rate will creep up in approx 1 year (indicating that option 1 isn't the right choice)

However I thought option 2 seemed quite generous given the supposed negative equity (living in South, the Nationwide index has made it look worse than it actually is given recent sales in area).

What are peoples thoughts?

Thanks

A

Thrugelmir

acs202 wrote: »

Hi all,

This is partly for others info but also asking for some advice. We bought our new build flat in the peak (summer 2007) and had a fixed mortgage for 2 years.

Having come to the end of this have now reverted to SVR clearly very high at 4.99%. As we are viewed as negative equity there had been little option but to rever to SVR but having phoned a number of times there ar the following new products.

Option 1 - Fixed for 1.5 years @ 5.49 with no fee

Option 2 - Fixed for 2.5 years @ 5.99 with no fee.

Now currently I am overpaying by £200 a month on the SVR. Should I continue doing this to reduce the capital elements. I appreciate it could be a gamble as it is widely expected base rate will creep up in approx 1 year (indicating that option 1 isn't the right choice)

However I thought option 2 seemed quite generous given the supposed negative equity (living in South, the Nationwide index has made it look worse than it actually is given recent sales in area).

What are peoples thoughts?

Thanks

A

What's the size of your mortgage?

Overpaying is reducing your capital balance and therefore reducing your interest as well on a monthly basis. (Thats if your interest is calculated monthly). At least by making inroads into the capital owed , remortgaging in the future onto a better deal becomes a more achievable target.

acs202

It initially started off at £159k as we had a 10% deposit and its now at £156k. I'm trying to overpay as much as possible that is physically affordable so we can try and move again in a couple of years.

acs202

Although I don't believe we are in negative equity I am fairly realistic about selling an apartment. I therefore imagine that our 10% deposit has all but eroded leaving us appox 99.5% LTV.

Still the more overpaid the quicker we can get it down i guess....

Thrugelmir

Very much a personal decision.

A 1% increase in mortgage rate will cost you £1,500 per annum in interest (for the fix). So on the basis that this is absorbed by your £200 overpayment. Cuts back your overpayment to save you around £900 in the next year. At current SVR rates.

I would go for the SVR and in the short term scrape together every penny I could to repay the capital balance.