SVR the better option?

vn108

Hello,

I'm trying to cut our mortgage (with the Woolwich) down as fast as possible, but our fixed rate ends in September.

There is 103k left to pay. (LTV= 51% on a 13 year term)
We have around 34k ready as a lump payment for September, so this should bring the mortgage down to 69k.

The SVR is 4.99% and the fixed rate is 4.29% (for 2 years with a £999 application fee) or 4.59% for 2 years with no fee.

We will be in the position to overpay each month by at least £1200. Now if I have done my calculations correctly it would seem to be prudent to stay on the SVR whilst it is at this rate and overpay each month, which should see us pay off the total quicker and cheaper.

I welcome any opinions and any holes that I have failed to spot!

Thanks

poppy10_2

The two year fix is probably a waste of time - the high interest rate and a hefty application fee outweigh the benefits of protection against rising interest rates over this short period. Have you looked at fixing for a longer period?

georgehere

If you only have £69k to pay ... AND you overpay by £14,400 a year, you are going to be finished in no time.

Don't know what your definition of 'overpay' is mind you - it suggests you will pay at least the annual interest of £3,500 .. and then £14.4k off the capital per annum

If it means actually that you will pay even more then your term is very short, under 5 years.

The only issue that might arise is that most fixed rate mortgages only allow a certain amount of overpayment (eg 10% of original loan per annum or 10% of outstanding amount per annum) when you move to a fixed rate. Again depends on your definition of overpayment. So looking for a fixed rate might not allow the substantial overpayments you are planning.

getmore4less

If staying with Barclays I would stick with the followon SVR and keep an eye on the deals, an offer may come up that is worth looking at.

The offsets might be a good option but Barclays fees are high at the moment for these.

Ather option might be the FD offset,

2.95% £699 fee even with £70k reducing fast you will save money in the first year with the 2 rate difference and have a lot more flexability.


Check your current T&C's some Woolwich/Barclays mortgages had the option to switch to offset for a small fee.

payless

i. check if rate does actually revert to SVR- as a lot of Woolwich deals revert to a preset base tracker

Yeah a 2% saving with FD, but watch out for potential other costs on top of Arr fee ( maybe valuation, Woolwich exit fee),

when workuing out the difference its easier to look at interest only calculation ( even if on repayment basis) as the differing amount of capital repaid may make the monthly payments look like there's not as much difference as there is

vn108

thanks for the input - I think that the SVR is the best option, as the monthly repayments should drop each month with the overpayments each month.

So if on the SVR @ 4.99% the monthly payment for 69k will be £585.
An overpayment each month of £1200 will make a total payment of £1785 each month.
As there are no additional fees this should bring down the repayment each month by about £20, which I think would be quicker & cheaper than on an offset?

vn108

Payless you are right.

I just checked my T&C and the rate will fall to 0.95% above the Barclays Bank Base Rate with is currently 0.50%, so thats 1.45% for the remainder of the time the interest rates stay like this!:T

Thanks again!

payless

Jammy!! 1.45% instead of 4.99% !!

Well some people at least it proves I know what I'm doing !


Wonder which clever guys at Woolwich/Barclays decided to offer those terms - without thinking that the world was about to change .. must be costing them some bucks

getmore4less

payless wrote: »

Jammy!! 1.45% instead of 4.99% !!

Well some people at least it proves I know what I'm doing !


Wonder which clever guys at Woolwich/Barclays decided to offer those terms - without thinking that the world was about to change .. must be costing them some bucks

Some follow on rates were base +0.17%.

Barclays follow on rates are still some of the best in the industry at base +1.49

payless

There were term trackers at +0.17 but I'm not aware of any deals that automatically reverted to/followed on to that rate ( ie after an initial fixed deal)

Yes I am surprised that barclays still are offering new mortgages with a base link that is ( in the current market) very competitive