Mortgage question - fixed year tie-ins?

rare_uk

Hi all,
my mortgage fixed 2 year term is about to end, and I have spoke to my Mortgage Building Society, about moving to another 2 yr fixed rate mortgage. They advise me to move to a Standard Variable rate with a 2.5% discount for 2 years instead, as this mortgage doesn't have a tie-in. They said that if I take a fixed rate mortgage out, then I am tied in to the deal for 5 years, i.e. 2 yr fixed and 3 yr SVR.


The site says "Early repayment charges apply during the first 5 years" and the following applies

I was also told this now normal practice due to current economic climates. Is this true? If it isn't then I won't renew my mortgage, I'll just let the mortgage move out of its fixed rate and I'll just pay thir normal variable rate, till I sort out a mortgage that doesn't tie you in.

Thanks :T

Senior_Paper_Monitor

Plenty of options out there at 2, 3 and 5 deal terms without tie-ins beyond the actual deal period.

Can't remember last time we processed a mortage with a tie-in clause beyond deal period (boss here goes quite rabid at the mention of 'tie-ins')

rare_uk

Senior_Paper_Monitor wrote: »

Plenty of options out there at 2, 3 and 5 deal terms without tie-ins beyond the actual deal period.

Can't remember last time we processed a mortage with a tie-in clause beyond deal period (boss here goes quite rabid at the mention of 'tie-ins')

so when the building society told me that it is now the norm...they were talking rubbish?

Joe_Bloggs

I don't think the tie in beyond a discount period is typical but I have seen it. Which building society is it in question ? There may be mortgage holders who have had similar experiences or will face them when their fixed term is up.
J_B.

Senior_Paper_Monitor

In answer yoiur question Mr UK, building societies sell you their products, they do not advise you about everyone elses products (and they have no need to do so) !

As Mr Bloggs indicates - the existence of tie-ins still comes as a surprise to some mortgage holders at the end of their deal!

and to clarify .... tie-ins are not the norm beyond the deal period (and in my - and my boss' - opinion should be avoided like the plague)

herbiesjp

Tie-ins during a fixed rate period are the norm

Extended tie-ins after a fixed rate has finished do indeed exist, but are by no means the norm.

Sounds like your building society rep, does not know what they are talking about, or is trying to soften the blow that their products are not that competitive

Have you compared what they are offering against the rest of the market?

rare_uk

Joe_Bloggs wrote: »

I don't think the tie in beyond a discount period is typical but I have seen it. Which building society is it in question ? There may be mortgage holders who have had similar experiences or will face them when their fixed term is up.
J_B.

The building society in question is Market Harborough.

Senior_Paper_Monitor

Mr UK,

From the front page of their website:




Our mortgage products are available for properties in England, Scotland and Wales and offer the following benefits:

• No compulsory insurances on any MHBS mortgage scheme.
• Interest is calculated on a daily basis. This means that when a payment is made to your account, your interest will be re-calculated immediately.
• Capital Repayments: You can repay up to 10% of the outstanding capital in any one calendar year without incurring early repayment charges, on any scheme.
• All of our mortgage products are fully portable (ie. if you move, you may take the unexpired portion of the mortgage scheme with you).

Also looked at the deals - the one that they have offered you has no tie-ins even during deal period ......


2.50% Discount For 2 Years
Interest Rate

2.50% Discount for two years
Overall cost for comparison
2.99%5.2% APR VariableRate is variable dependant upon the Society's Standard Variable Rate. The Society sets its Standard Variable Rate by taking into account a number of factors, including the Bank of England Base Rate. The SVR can be changed at any time, but will not necessarily rise or fall in line with movements in the Bank of England Base Rate.

Scheme Features
Maximum Percentage Loan 75% of purchase price/valuation
Minimum Loan £35,000
Maximum Loan £500,000
Early Repayment Charges None

Nice product to be honest.

There are indeed some fierce 'early redemption penalties and tie-in beyond the 2 year deal period' on their only fixed rate offering, namely:

Early Repayment Charges
For full repayment: an early repayment charge based on the remaining balance will be incurred as follows:

• 4% during the first 3 years.
• 3% during year 4.
• 2% during year 5.

For partial repayment: no early repayment charge will be levied providing additional payments do not in any one calendar year exceed 10% of the remaining balance at the beginning of that calendar year.

• If you exceed this 10% figure, an early repayment charge using the percentages shown for full repayment will be imposed on the amount that exceeds the 10% allowance.
• Any unused overpayment allowance cannot be carried forward to subsequent years.
• All overpayments reduce interest immediately.

If you transfer to a new mortgage product, then an early repayment charge (if applicable) will be levied on the remaining balance at the time of the change as if the mortgage had been repaid in full.

Please note that these are just exerts from their site - and you should read all the relevant documents as other terms and conditions apply.

rare_uk

Thanks SPM, I just wanted a fixed rate as I wanted the "luxury" of a fixed sum for 2 years, obviously with the Variable Rate product it might not be the case if interest rates go - so that scares me :eek:

It was just the way it was explained to me that the tie-in for fixed terms, after the initial 2yr fixed rate period is over, is "the norm", that freaked me out. As I'm sure I could get a fixed term with the same monthly payments as they have quoted me, but with the reassurance that for 2 years my payments won't go up.