is this Woolwich mortgage a good deal?

Wonnov_Menny

Back in early May we applied for a mortgage with Abbey but they are so ridiculously slow we are still waiting, they say it is still with the underwriters. Anyway, we decided not to wait for them any more (the vendors have been very good waiting all this time, but they were starting not to believe that we were still waiting to hear from Abbey) so we put in another application via Woolwich.

Woolwich have been the total opposite of Abbey, everything completed within one week, including the valuation, all credit checks etc, and a mortgage offer letter.

Now to my question, we've been advised that this mortgage isn't quite as good (I think this refers to flexible) as similar ones offered by Abbey, but I'd like to find out if this mortgage we have been offered is a good deal.

It is a Lifetime Offset Tracker (K6M) mortgage, variable rate 3.24% above Barclays base rate (currently 0.5%), for the whole of term. Current rate payable is 3.74%. Following interest rate change, monthly payments will be amended at first available monthly payment date. Not sure if this means monthly interest, as we
asked for interest to be calculated daily. The mortgage is interest only, but that's ok as we intend to regularly overpay it, and also put lump sums in as and when available (possibly between 1-3 months apart). As far as I understand it, we just go into any branch of Barclays and pay anything/any amount we want into the mortgage current account that we have had to open and it will be deducted immediately from the mortgage.

The fees are £999 which they have added to the mortgage, we had to pay £355 valuation fee up front, and we have had to take out a Barclays current account and savings reserve account to be linked. They will also deduct a completion fee of £35 from the funds sent to the solicitor, and the mortgage has a final repayment charge of £275.

Is this a good deal? Are the Woolwich ok? Is there anything we should ask before accepting the offer? Any advice/info is appreciated.
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confused31_2

personally i think the deal is rubbish, it might look okay now but what happens when rates go back up to 5 percent, they might even go up more, if i was you i would try and fix.

shirlgirl2004

I don't know about the lifetime offset tracker but our current mortgage (base rate tracker) has been fine. I made overpayments online as you might do any electronic payment. The payment takes a few days to reach the account but it all works fine. Being an offset mortgage I can't believe that it won't be flexible. Afterall you can put any overpaments in the linked account and then take it out if an emergency arises. The rate isn't great though. We've gone with First Direct for our new mortgage which with base rate at .5 makes a mortgage rate of 2.99 APR. Don't know if you'd be able to get it though as unsure of what their LTV requirement is. FD say there's a 10 week or so wait but its been about 3 weeks and we should get actual offer this week (already have the AIP) as we've been waiting over a week for the survey to be done. The surveyor seems to be the slowest part of the application.

6am

Did you ask about Early repayment charge? According to web site it is 1% of the original balance upon full redemption until 31/10/2012

confused31_2

These trackers that are 2.5 percent above the boe rate of 0.5 percent are in my opinion a very big risk, and the mad thing about them is the size of the fee the banks charge, why would someone pay a massive fee to got on a tracker 2.5 percent above the bank of england base rate for life when the average boe base rate is usually about 6 percent.

good luck

Wonnov_Menny

Hi everyone, and thanks for your replies..

confused31: You say we should try and fix, I originally wanted to do this, but was advised against it.. (I'd love a 5yr fixed rate at 3%) our advisor explained there are no fixed rate deals around at the moment offering anywhere near as low a rate, or with the flexibility that we want to overpay as and when we want, or to pay off lump sums, etc. Apparently, most mortgages only allow overpayment of 10% per year. Re. the massive fees... The fee on this product is £999, cheaper than Abbeys which was around £500 more.

6am: You are correct, the ERC is currently 1% of loan amount until 31/10/2012, but our advisor said this would not be a problem (if we do wish to repay the mortgage in full before this date), we just leave £1 outstanding until 1/11/2012.

shirlgirl2004: I asked about First Direct, but there is a long waiting time, we've already kept the vendors waiting since May due to Abbey taking forever, so one of the criteria was to get a fast offer before they sell to someone else who has matched our offer. We've been gazumped 3 times before and lost valuation and solicitors fees. Re. making overpayments, we don't use online banking at all, but I suppose it's not a problem to register with Barclays. An even easier method of overpayment I suppose though is just to pay any overpayments directly into the mortgage account at our local Barclays Bank, just 2 mins away.

According to the mortgage offer letter, it doesn't track BoE rate, it tracks Barclays Bank Base Rate (BBBR). Also, if we don't accept this mortgage deal for whatever reason, we have to pay a £150 withdrawal fee. The letter also refers to a key facts illustration which it says we should have rcvd before we applied, but we didn't get one of those.
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beecher

I think it is a high margin over base rate myself. Expecting a 5 year deal at 3% was unrealistic as that's extremely low. Why not go on a repayment mortgage if the lack of overpayments on a fix is a problem? I'd certainly be worried about where you will be when base rates increase again - at their 'norm' of 5% plus, you'll be paying over 8%. Depends on your attitude to risk though, and ability to pay high interest rates. Make sure you know that you'd be in a position to pay rates at least 10%

chodges84

Woolich do a 5 year fix at 5.19%, a much better deal as you know where you are. Do you want to be paying 7% plus as you may end up doing so WHEN (that is not an if) the base rate rises.

If I were you I would sit down and work out how much the amount you are looking to borrow will cost you all the way up to 10% and maybe further. If you cannot afford it DO NOT risk a tracker.

samba

Trackers are good when interest rates are high and indications are that they have reached their peak, such as back in September 2007, as the only way they can go is down. When interest rates are low, such as they are now, then a fixed rate is the way to go, as the interest rates can only go up. If you didn't get a tracker 2 years ago when they could be had at just above or even below base rate, then you missed the boat and getting one now at the current rates is senseless.

Unfortunately, it is pretty much luck of the draw as to what is available when you need it, but if I needed a mortgage now, I would get a fixed rate one for sure.