Have we made a mistake fixing?

lelole

Hi all, yes we have just fixed a proportion of our borrowing, roughly 1/3. We only had the option of 3 mortgages because the other 2/3 is on a tracker which is tracking at 0.29% above the base rate currently 0.79%. So obviously we didn't want to move away from the tracker, and therefore did not want to change banks... so unfortunately L and C no use there...

The overpayment thing with the fixed is important because it is only a small portion of the borrowing so although we have a healthy sized mortgage, 10% is a smaller amount than you think tho more than £250! We have been cautious with the deposit amount so are likely to have a lump sum too... and the penalty is 3%...

It's interesting to me JulieQ that you say not to overpay the tracker and to put money into a fund to use to reduce LTV... I am not sure I understand why this would be better/cheaper than paying off the tracker and reducing the amount owed? Am I being dumb

Thanks again for all of your replies, it's great to get so many opinions...

Leah and family

Gorgeous_George

Given the options I'd have done the same thing.Chillax.GG

Cannon_Fodder

lelole wrote: »

It's interesting to me JulieQ that you say not to overpay the tracker and to put money into a fund to use to reduce LTV... I am not sure I understand why this would be better/cheaper than paying off the tracker and reducing the amount owed? Am I being dumb

The reason for not overpaying the tracker, is that you should earn more interest in a savings account, than you would have to pay to the tracker, then pay a lump off out of those savings when rates rise...

Wutang_2

Harry_Powell wrote: »

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.

What on earth are you talking about??

lelole

Thanks Cannon Fodder, Yes that does make sense, doh!

Leah

Harry_Powell

Wutang wrote: »

What on earth are you talking about??

I'm saying that the person I quoted was ill advised to get a 2 year fix at such a high rate when interest rates are so low and will be so low for the next two years, i.e. the lifetime of their fix.

Much better to have arranged the additional lending at their lenders SVR than to have fixed for such a high rate for such a short duration, especially if they want to make significant overpayments to reduce the debt. If they had been on SVR the mortgage would be cheaper (allowing greater overpayments) and there would not be any restriction on overpayments.

What's so difficult to understand about that?

Harry_Powell

noxon wrote: »

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.

Er, if you read carefully you'll see that they have ported the tracker deal (I assume to buy a new house) and have had to arrange additional mortgage borrowing (probably because the new house was a bit more expensive than the old).

They didn't have to go with the 6.49% fix in order to keep the tracker deal, they could have simply borrowed the additional amount on the bank's Standard Variable Rate, which would be much less than 6.49%, would not have restrictions on repayment and would probably be fee free (unlike most fixed deals).

noxon

Harry_Powell wrote: »

They didn't have to go with the 6.49% fix in order to keep the tracker deal, they could have simply borrowed the additional amount on the bank's Standard Variable Rate, which would be much less than 6.49%, would not have restrictions on repayment and would probably be fee free (unlike most fixed deals).

Unfortunately, the conditions on porting the sort of trackers we're discussing usually state that any additional borrowing has to be on a "deal" available at the time, which generally excludes penalty-free borrowing at the SVR.

And hahaha to getmore4less, you got me. I've been spending too much time lurking on the mortage-free board and have become despondent. Even if I lived on fresh air and only left the hosue to go to work, clearing my mortgage in 3 years or even 10 years is pretty much impossible though we're overpaying as much as we can.

Harry_Powell

noxon wrote: »

Unfortunately, the conditions on porting the sort of trackers we're discussing usually state that any additional borrowing has to be on a "deal" available at the time, which generally excludes penalty-free borrowing at the SVR.

Do you have examples of this or names of the mortgage lenders that do this, perhaps we could 'name and shame'? It seems unfair business practice for mortgage providers to force their customers onto such poor deals. This is surely something that Martin Lewis should be looking at.

I'm looking to acquire a mortgage myself shortly and so will be scrutinising the small print very carefully. Thanks very much for your insight.