Mortgage Advice

wisdom_please

I am coming to the end of my current 3 years fixed rate and I have spoken to my lender and they are offering me these:

2 years fixed rate at 3.99% with no arrangement fee apply (you pay back £1.54 for every £1 borrowed)

3 years fixed rate at 4.24% with £599 arrangement fee (you pay back £1.55 for every £1 borrowed)

Which is a better deal and why:

Wutang_2

I am sure you will get a proper response - but this looks like an exam question!!

_Andy_

Can any people that reply please ensure their 'workings out' are shown clearly.

herbiesjp

I was looking for option C and D as well - make it a proper multi choice

wisdom_please

I am trying to work out, taking the current financial climate into consideration what is the best deal to go for.

If I go for the 2 years fixed rate, will the market have change a great deal? What if I decide to sell within the next 2 years?

Or will 3 years fixed be a better choice for the market to recover if I want to sell soon.

_Andy_

No-one has a crystal ball.

Regarding if you wanted to sell -depends what you mean - are you meaning sell up and rent? Or sell and buy another?
Most mortgages are portable so you could take it to another property.
There will be ERCs to pay if you closed it completely early.

getmore4less

wisdom_please wrote: »

I am coming to the end of my current 3 years fixed rate and I have spoken to my lender and they are offering me these:

2 years fixed rate at 3.99% with no arrangement fee apply (you pay back £1.54 for every £1 borrowed)

3 years fixed rate at 4.24% with £599 arrangement fee (you pay back £1.55 for every £1 borrowed)

Which is a better deal and why:

What is the follow on rate that might be the best deal.

It is difficult to assess the risk profile without more information.

For a small loan the first will almost certainly be the best for a larger loan and with limited funds the second may become better risk of rate rise.

eg
Deal 2:
£50599 15y repayment @ 4.24% payment is £381(rounded up) after 3 years you owe £42,850.50

Deal 1.
£50000 @ 3.99% paying £381 after 2years you owe £44,644.03

so after two years to stay ahead of the 3 year deal interest rate need to stay below 6.35% so the followon rate will be important a good tracker might rate might win if base rates stay low.

wisdom_please

The standard variable rate is: 4.24% for both.

getmore4less

So will rates go up by 2.11%(rough est) or more in the 2y-3y period

Thats your call

Anastasia

If it was me I would go for the 3 year deal. Most financial experts writing at the moment in the papers and online are recommending fixing for as long as you can to protect you from the interest rate rises expected. If you come off your rate in 2 years you may get a big shock.

wisdom_please

Thanks guys for your advice.

The reason why I am thinking about the 2 years deal is because, I may change jobs within the next two years and that may mean relocating.

The mortgage is portable.