Follow on Rate

kriss_boy

http://www.nationwide.co.uk/mortgages/newcustomers/firsttimebuyer/fixedinterestrates.htm

Does the follow on rate after your fixed rate ends means you pay 3.99% above the BoE in rate? Obviously its not 3.99% for the remainder of the mortgage.

beecher

The follow on rate is the Standard Mortage Rate, and isn't directly connected to the BoE rate. It could be a lot higher than 3.99% by the end of your fixed rate - this time last year my bank's rate was 7% which was about the 'norm'.

kriss_boy

Mine is a tracker 1.23% above the BoE and thats for the entirety of the mortgage.

So if the 3.99% follow on rate for the fixed rate above does relate to the BoE int rate then how is it determined?

Why advertise it at 3.99% or any rate for that matter if its in their hands to determine? Arent you at the hands of the lender opting for a fixed rate by allowing them this freedom?

beecher

Your link makes it clear that the SMR may well be higher when your fix comes to an end

At the end of your fixed period you will move to our variable Standard Mortgage Rate (SMR) for the remainder of the mortgage term. Note that if interest rates have risen in the meantime you will need to prepare for higher payments.

It is the 'norm' for the SMR or SVR to be higher than any deals available - like I said mine was 7% this time last year (and closer to 8% the year before). You'd have found few people on it before rates decreased. Anyone that concerned would've found a deal which goes onto a tracker, like yours - but then again base rate plus 1.23% would 'normally' not be that lower than most SVRs.

kriss_boy

Is there a relationship between the typical SMR rate and the BoE int rate.

Mine is a tracker based on the BoE, are trackers this close to the BoE typically lower or higher than the int. rate a mortgage lender would offer on a SMR?

beecher

kriss_boy wrote: »

Is there a relationship between the typical SMR rate and the BoE int rate.

Mine is a tracker based on the BoE, are trackers this close to the BoE typically lower or higher than the int. rate a mortgage lender would offer on a SMR?

I am not sure - I can only speak for my own lender, Halifax. Looking at my mortgage statements:

In 2003, SVR was 5.65% (I fixed at 3. 89%) Base rates at 3.5%
In 2004 SVR was 6.5%, then 6.75%
In 2005 SVR was 6.75% then 6.5%
In 2006 SVR was 6.5%, then 6.75%, then 7%
In 2007 SVR was 7%, then 7.25%, then 7.5%, then 7.75%,
In 2008 SVR was 7.5%, then 7.25%, then 7% - and then fell to 3.5%

I think looking at that, SVR is 'normally' more than 2% over base rates, but you'd have to look at the historical figures to work that out. The relationship is a bit skewed at the moment, and who knows how it'll work on the way up, but I think it is best to treat this as a blip and assume the 'norm' is closer to 5% base rate, and 7% SVR, with rates likely to be higher than this at some point in the future.

belfastgirl23

Is it that you are coming off a nationwide deal and wondering what your rate is? Because at the minute it's 2.5%, 2% above BoE which was the committment they made when you signed up for your fix. I don't think they've made any commitment about what their SVR will be though if you're wondering what happens if you fix now and then come off the rate in 2/3 years time.