Is this a good mortgage offer?

herbiesjp

Spangled wrote: »

Trackers generally allow unlimited overpayments, whether that be one-off lump sums or regular monthly overpayments plus no early repayment charges. .

Not true

Most have 10% limits

And most do still have penalties.

You are right though to consider trackers.

But you would need to look at trackers that had lower arrangement fees than maybe the higher fees attached to the lowest headline rates

littlebighorse

I'm in a similar position to yourself in some ways Swindler in that I am hopefully going to be a first time buyer with a 50% deposit on a similar value house (simply from having worked hard and money saved for 9 years with a litle help from MSE!)
My own experience is that, like others have said, whilst base rates are historically low and there are a few headline grabbing deals out there, the reality is that even in positions like ours rates aren't actually that low and arrangment fees for the lowest rates are high.
My first port of call was a friend of a friend (I believe whole of market) mortgage broker who gave me an idea of what rates were around and what I could borrow.
He also told me that he was unable to offer HSBC mortgages (apparently they don't deal with brokers?) and that as I bank with them to speak to them as they have some market leading deals.
Spoke to HSBC in early August and got an agreement in principle as well as some quotes as to rates.
In early September I found a house I hoped to buy and agreed a price. I checked with the broker and also looked around on the internet comparison sites and everything pointed to HSBC being the best option. Especially as I needed to act quickly as the house is a repo.
I was looking to borrow 53000 at 50% ltv. My first choice was either tracker or fixed. Tracker would have obviously been cheaper until rates went up (who knows when!) and also had the advantage of overpaying by as much as I wanted.
In the end however I went for the security of a fixed. I decided on a 5 year fix as my own inkling is that rates could well be very high in 2 or 3 years time.
An important thing I found to take into account on relatively small borrowing such as 40k/50k is the booking/arrangement fee. For example on some mortgages that were high fee but a small, maybe 0.3-0.5% lower rate there was little or no benefit. You need to do some simple sums with a mortgage calculator.
In the end I decided to go for the 5 year fixed at 4.95% with a £1000 fee. However when I went to meet the bank mortgage advisor I was told that this fee was entirely non-refundable if the sale failed to go through. Even if I got a mortgage on a different property with the bank. So basically if I was gazumped, the seller pulled out, the survey showed problems etc. I would lose £1000 plus a further £200 or so for surveys etc.
As I am hopefully buying a repo (not my ideal choice but it is right size house in right area) and there is a considerably higher chance than normal of the sale falling through (as the property is marketed even after a sale is agree and the price printed in the paper)
After much deliberation I decided to forego the lower rate but also the risk of losing the £1000 and instead went for a fee free mortgage at 5.74%. This will cost me an extra £500-£600 over the 5 years unfortunately but I just couldn't risk it.
Another thing to consider is that rates may change depending on how long it takes to find your new house. For example some of the quotes I was given in August had increased by 0.2% by the time I had an offer accepted in mid September.
So I am on a 5 year fixed rate at 5.74% (as I have a HSBC premier account) but with no arrangement fees. I can make a maximum of 20% overpayments but no more during that time.
I too had hoped for a 1% lower at least but some rates are not as good as they first appear. Those arrangement fees can really make a big difference! Plus watch the small print with regards overpayment as it seems that can vary quite a bit.
I completed the mortgage application interview in bank on Tuesday (took 2.5 hours!). Mortgage was approved and survey on house done by Friday lunchtime! I was quite pleased with that. Fingers crossed everything else goes through OK.
I have heard on here that HSBC are rejecting lots of applications for no major reason so it probably helped that I am a loyal customer.
Congratulations on managing to save such a massive deposit and good luck with your house purchase. Apologies for the long winded post but I thought an account of my experiences might help.

Swindler

Thanks littlebighorse for the reply, maybe I'm being naive but I think 5.74% is high. When I find a house I'll book an appointment with a whole of marker mortgage advisor, I think it might be better if they find me the best deal and provide advice, even if I have to pay for it.
I understand some advisors get their feel from the mortgage itself rather than the person applying for the mortgage.

No wonder some people are being turned down for mortgages if the above % is quoted for such a small mortgage, plus the large ltv.

littlebighorse

Yep, I think a broker is definitely the way to go but in my case I spoke to one and he said that he couldn't match HSBC.
On the face of it 5.74 seems high but it is entirely fee free whereas many lower rate mortgages (including the two you quoted at Northern Rock and Nationwide at around £1000 & £650 respectively) have high fees and you have to factor that in.
For example I went in the bank expecting to get a rate of 4.95 (which as I understand it is about a market leader at present for a 5 year fix).
On the loan you are talking about the repayments would be £423.29 at that. At 5.74 the payments would be £438.88.
The lower rate looks and sounds impressive and you would save £15.59 a month. But add that up over the 60 month period of the mortgage and you have a saving of only £935.40 despite paying the £1000 fee.
So in actual fact it's no better at all. Or at least that's how it appears to me. But I am far from a mortgage expert.
The lower rate fee paying mortgage would have been better for me at 53k but for the reasons that I mentioned I couldn't risk losing £1000 for nothing to potentially save £500.
Of course on a loan of £150k the lower rate would be massively significant in comparison to the size of the fee.
To be honest if I were in your situation and was sure that I could comfortably afford to spend £500 on mortgage repayments per month I would be very tempted to maybe go with a tracker or the very lowest rate that allowed overpayments with minimal fee as rate rises aren't going to hurt you too much on such a small loan. I'd certainly look into it anyway.

Soot2006

We just managed to get 4.69% 5-year fix with Northern Rock.
We are first time buyers with good deposit. There were better rates available but this was the only mortgage that allowed unlimited overpayments. As such, we're planning to start overpaying after Christmas, which will reduce the interest as well & makes the rate worth it in the long term.

littlebighorse

4.69% for a 5 year fix sounds a great deal Soot, even if there was a hefty arrangement fee. Did you get that deal direct with them or via a broker?
The best I was offered via the broker was 4.99 (I think that was Brittania) and I think Northern Rock quoted 5.79 (the one the OP mentioned his original post which had £995 fee).
I tried to look around on all the price comparison / mortgage recommendation sites too but couldn't find anything low rate, low fee over 5 years that suited (some of the 2 & 3 year fixes were 4-5%!)
We both agreed that as I banked with HSBC and needed to act quickly that it would be my best option but it looks like I should maybe have tried another broker.
Oh well, hopefully if I get the house it will have been worth it and at least with a small loan I would only be losing out on a little over £100 per year (at 4.69 rather than 4.95) rather than thousands.

getmore4less

With £500pm to throw at this a lower rate with overpayments is the way to go.

You also want to make sure that the followon rate is a good one so that you can choose to stay and not take the hit on another set of fees(which on low mortgages are relatifly high)

The first direct offset tracker is a good one.
base+2.29%(2.79%) offset with £999 fee

The fixed offset go onto SVR(3.69%) which is not so good and are higher rate on the fix but fees are better..

Barclays also have some OK deals with good follow on rates but fees tend to be high(£1k).


I think that FD offset tracker is a good deal for this level of lending
not sure on the fees on your other choices but lets say they are very similar.

Paying £500pm
£40k @ 4.58% 3y fix, left to pay after 3 years £26,623.55
lets say rates stay low for 1.5years then go up for the next 1.5y
£40k @ 2.79% tracker after 18months £32,527.41 left to pay.

To stay ahead of the fix and keep the mortgage below £26,623.55 by 3y the rate has to go over 6.93% thats a base rate rise of 4.14%.

Spangled

herbiesjp wrote: »

Not true

Most have 10% limits

And most do still have penalties.

You are right though to consider trackers.

But you would need to look at trackers that had lower arrangement fees than maybe the higher fees attached to the lowest headline rates

Point taken but maybe I should have qualified my statement by saying *lifetime* trackers. Most - in my experience - don't have ERCs. Well, the three I've had over the years haven't.

HSBC's current lifetime tracker doesn't have ERCs and you can make unlimited overpayments:

http://www.hsbc.co.uk/1/2/personal/mortgages/first-time-buyer/tracker-rate

If the OP was to consider a tracker, I'd say a lifetime one was the way to go in order to avoid paying repeat arrangement fees when deals ran out - esp important on a small mortgage amount such as £40k. Cheers.

Soot2006

4.69% for a 5 year fix sounds a great deal Soot, even if there was a hefty arrangement fee. Did you get that deal direct with them or via a broker?

via a broker.
Yes, there was a hefty arrangement fee, but we sat down and worked it out and including the overpayments we're planning after Christmas (thereby reducing the capital amount that we have to pay interest on) and know what's what for 5 years, it came out as a clear winner in the comparison. Even if we don't achieve the planned regular overpayments this year, it's nice to know that for the next 5 years we can throw spare cash in that direction ... Earn less interest on my savings anyway, so what the hell!

DaveF327

Swindler wrote: »

She told me I could have a
5 year fixed rate at 5.79% paying £439pm with Northern Rock or
3 year fixed rate at 4.58% paying £416pm with Nationwide

Over what term?

I've just got myself a good 3yr fixed deal with Natwest at 4.39%

In your case, you could get a 40k mortgage at that rate for £494.86 per month over 8 years. If it's a standard 25 year mortgage you're after, then you'll pay £219.84

Natwest's calculator thingy is here: http://www.natwest.com/personal/mortgages/g1/repayment-calculator.ashx