To fix or not to fix, that is the question...

cjcopland

First post, so bear with me....

I have an A&L mortgage which is currently on an SVR of 4.99% (monthly payment of £1,075). I came off a 2 year fix in Sept 09 (at 5.79%) and was not given a choice about moving on to the SVR given the LTV.

I had spoken to A&L and was urged to call back in early December (which I have just done) as they said they were changing their mortgage lending criteria. It appears thay have done so.

In the past their mortgage lending criteria was more or less solely based on the LTV which was driven by the Halifax broadbrush house price valuation.

Now it is based on a 14 point system which takes into account, amongst other things, repayment history, credit rating, and a more focused house price valuation (i.e. not just the average for the whole of the west midlands).

The guy I spoke to meant that as a result of this change he could offer us two fixed rate deals. One for 1.5 years at 5.49% (monthly payment £1,113) and the other for 2.5 years at 5.99% (monthly payment £1193)

I now have two questions.

1. Is this change in mortgage lending criteria unique to A&L? Is it worth me shopping around? We bought our house for £221k (in Sept 07) and owe £194k. I think a conservative valuation would put it at (£240k) taking all factors into account.

2. Are these fixed periods too short? I am concerned that when I come out of a fix in either 1.5 or 2.5 years interest rates may have sky rocketed. I appreciate it is almost impossible to answer this question, akin to how long is a piece of string, however I have read a lot of articles arguing the longer fix that you can get the better (although this of course has to be balanced with a reasonable rate)

Any comments on this would be greatly appreciated. I have actually spoken to my IFA in the last three months and will do too but I would also like to hear what you guys think.

Cannon_Fodder

Not even the hotspot of London is back to Sept 07 prices, certainly not gained 10%.

Have you spent much doing the place up? Was it an EA or surveyor valuation?

If not, you might need to seek a professional valuation to give you a better idea of value, as that will impact your LTV. This will affect the rates at which deals might be offered by other lenders.


[IMG]http://www1.landregistry.gov.uk/houseprices/housepriceindex/report/default.asp?g=1&gt=1&a=E&W-ALL&ac=London&s=01 August 2007&e=01 October 2009&t=4[/IMG]

Using http://www.nationwide.co.uk/hpi/Default.asp?calculate=true gives a Greater London figure of £203k, for example.

I don't see any point fixing for such short periods. Make the most of what reduction you had on going onto SVR, and review in 6 months.

Let_Us_See

In the past their mortgage lending criteria was more or less solely based on the LTV which was driven by the Halifax broadbrush house price valuation.

Whilst interest rates may have been driven by LTV tiers, the same cannot be said for underwriting, although a Fast Track application could circumvent full underwriting terms and conditions.

The guy I spoke to meant that as a result of this change he could offer us two fixed rate deals. One for 1.5 years at 5.49% (monthly payment £1,113) and the other for 2.5 years at 5.99% (monthly payment £1193)

These are not competitive and you shold do better shopping around.

Now it is based on a 14 point system which takes into account, amongst other things, repayment history, credit rating, and a more focused house price valuation

Again, perfectly straightforward underwriting criteria.

Shop around as you should be able to find a 3 or 4 year fixed rate which is lower than offered by AL.