Have we made a mistake fixing?

lelole

Hi, we have just made an application for a mortgage for our upcoming house move. We have decided to keep our current borrowing on the +0.29% lifetime tracker we have... we need to borrow just over half again too, which we had to choose from the current mortgage range. With the LTV we have there were only 3 options - 2yr fix at 5.49%, 3yr at 6.39% and 5yr at 6.49%.

We went for 5 yr fixed even tho the interest rate is extortionate compared to the BOE BR as we thought with the tracker too, we were hedging our bets a little, and also keeping some kind of control under some of the borrowing replayment costs. However having seen the new HSBC 1.99% deal which of course is not better than our tracker, or possible for us, we feel worried we have made the wrong choice, assuming this does indeed start to introduce competition.

We only applied yesterday, so probably could change - should we try?

Thanks for any help - I do understand this is vague and it would be only opinion not proper advice, but we would still be interested to hear...

Thanks

Leah

hearts

In my opinion if these were your only option then you chose the best one. Did you have to fix? What was/is the basic rate?

Cannon_Fodder

I think the hedging you mention is the correct option. No-one can be sure exactly when rates will rise, but rise they will. Having a foot in each camp protects you, in possibly both directions, over the course of 5 years.

It will take some time for the HSBC deal to instill competition, if at all. They are, after all, one of the few lenders who had a decent handle on their products/finances, all along. Others are still re-capitalising, and may not be in a position to compete, even if they wanted to...

JF77

I am currently porting my +0.36 lifetime tracker and borrowing an additional 10% (approx) which is 2 years fixed at 6.49% (fee free)

I did not want to be tied in for too long. I plan to overpay the 6.49% by at least £100 per month to get rid of this as quickly as I can.

Also, when I first took out my tracker (nov 07) the rate was 6.11% so I know I can afford further rate increases.

TBH, I was very surprised what fixed rates were available to us. I think 5.99% was the best and, this is due to my increasing Loan to Value ratio. My current lender said they were fine porting with up to 85% LTV so happy days.

noxon

There's always "what-ifs" but eventually you have to make a choice and it sounds like you've thought it through.

We were in the same position when we moved house 4 months ago.We wanted to port a base+0.28% tracke but we also needed an extra sum and with a total LTV of 85% our only option for the additional borrowing was 6.79% fixed for 3 years. So now our mortgage is approx 60% at 0.78% and 40% at 6.79%. Overall this is still better than any other mortgage we could have got at the time. Like JF77 we're hedging our bets still further by overpaying on the fixed part by as much as we can afford while the tracker is still so low, maybe you could consider that too.

lelole

Hi to all,

Thansk for the reassurance! Perhaps we are wiser than we believe...

We are currently overpaying our mortgage by about 250 p.m. and will continue to do so once we move - unless things start getting a bit tighter...

The fixed rate has a 10% of balance limit for overpayments, so we need to be careful otherwise if we even put in £1 more we would be subject to the fee, but we can do unlimited overpayments on our tracker, so anything extra can pay some off that...

We weren't given the option of a SVR but did wonder if that would have been a good option for the time being at least? But then we thought we would have to fix again if the rates rose, and worried about LTV if house prices drop...

Thanks again, feel much better about our decision...

Leah and family

Harry_Powell

JF77 wrote: »

I am currently porting my +0.36 lifetime tracker and borrowing an additional 10% (approx) which is 2 years fixed at 6.49% (fee free)

I did not want to be tied in for too long. I plan to overpay the 6.49% by at least £100 per month to get rid of this as quickly as I can.

Also, when I first took out my tracker (nov 07) the rate was 6.11% so I know I can afford further rate increases.

TBH, I was very surprised what fixed rates were available to us. I think 5.99% was the best and, this is due to my increasing Loan to Value ratio. My current lender said they were fine porting with up to 85% LTV so happy days.

Why are you fixing your mortgage for 2 years at such an extortionate rate when pretty much all financial analysts believe that we will continue to have BoE rates at 0.5 for another 12 months with low rates (below 3%) for at least another year after that.

All you're doing is fixing at a high rate during the period when everyone else has low rates and then coming off your fixed rate just as mortgage rates start to rise. If you're dedicated to rapying this additonal loan quickly, then the lowest rate you can get would have been the way to go because you'd have more free cash to overpay the mortgage.

I hope you don't mind me saying it, but it looks like you've made the worst choice you possibly could in your circumstances.

julieq

Given all the mortgages on the market, I'd broadly agree with Harry, but if you genuinely only have the choice of 3 you give it's not going to hurt all that much to take the 5 year deal and you get fixed costs for that period. I take it you've tried London and County to check that that really is all you can get?

But for heaven's sake, don't overpay the tracker. At the rate you have that would be mad unless interest rates really shoot up. Build up cash or investments somewhere outside the mortgages so you have the option of reducing the other part of the loan with a far better LTV when you're remortgaging.

Any decision on fixing rates is essentially a gamble, and you'll win some of those and lose others. It's more important to focus on your own objectives than worrying about gains and losses relative to others in the game, if it meets your affordability criteria and you have a strategy for the point at which you are able to switch so you can get the best deal possible at that point.

noxon

Harry_Powell wrote: »

Why are you fixing your mortgage for 2 years at such an extortionate rate

Er, if you read carefully they've only fixed 10% of their mortgage at 6.49%, in order to keep the other 90% on the base+0.36%tracker deal.

noxon

lelole wrote: »

The fixed rate has a 10% of balance limit for overpayments, so we need to be careful otherwise if we even put in £1 more we would be subject to the fee,

You must be lucky enough to have a small mortgage overall if a £250pcm overpayment means paying more than 10% of the outstanding balance any time soon. That's definitely one thing I don't have to worry about, house prices and hence mortgages where I live being what they are.

getmore4less

noxon wrote: »

You must be lucky enough to have a small mortgage overall if a £250pcm overpayment means paying more than 10% of the outstanding balance any time soon. That's definitely one thing I don't have to worry about, house prices and hence mortgages where I live being what they are.

Er if you read carefully they've only fixed 10% of their mortgage at 6.49%, in order to keep the other 90% on the base+0.36%tracker deal and it's that 10% that has the overpayment limits