mortgage renewal help please

gimmasi

hi people i am coming to the end of my fixed interest only mortgage. I am having to stay with the halifax due to negative equity and change in circumstance etc.

they have offered me another 3 year fixed interest only at 5.29 or a tracker interest only at 2.79 for 3 years

the tracker is based on the bank of england 0.05 % base i understand that if the bank goes up so does my payment however im trying to predict if the bank of england rate will go above 3.00% in 3 years as this is the maximimum i could afford what does anybody think

all suggestions gratefully recieved

simon (barnsley)

opinions4u

gimmasi wrote: »

they have offered me another 3 year fixed interest only at 5.29 or a tracker interest only at 2.79 for 3 years

You could also stay on their SVR of 3.5% which tracks at 3% above the BofE base rate of 0.5%.

Looking at their web site your offers are:

Tracker at Bofe+2.79%=3.29% with a £1,249 fee.
Fix at 5.29% for 3 years with a £999 fee.

How much do you actually owe?

im trying to predict if the bank of england rate will go above 3.00% in 3 years as this is the maximimum i could afford what does anybody think

There's not an economic expert on the planet who predicted the fall from 5.5% to 0.5% within 6 months. Nobody can asnwer your question.

There was an article in the press recently that said "rates could stay low for years". But I read another article in the same paper that said "homeowners should prepare for a payment shock when rates rise".

I don't have a crystal ball. I don't know.

That said, here's what I would do:

1) Go on to their SVR because this saves you a fee of £999 or more.

2) Work out what 2% of your mortgage is each month (e.g. if your mortgage is £120k then 2% = £2,4000 a year = £200 a month).

3) Overpay the mortgage with half of this amount in order to get your debt down. This will reduce any increase in payments in the future as and when rates rise.

4) Stick the other half in to a savings account that you only ever fall back on to meet mortgage payments should your rate go above 6%. The AA offer a half decent rate of 3.15%,

5) If rates rise, and you can't afford to pay as much in overpayments / savings then reduce the amounts saved by no more than the increase in mortgage payments.

6) Keep an eye on Halifax offers for exisiting customers. If a great offer comes along that you qualify for (e.g. a cheaper 5 year fix) then junp!

Doing tihs will reduce your debt and build up a contingency fund that will effectively buy you time to adjust to any significant increase in payments. Redcued debt, combined with higher house prices (if that happens) will open up more choice in remortgaging at somne point in the future.