Tracker reverting to BMR - retain or switch

firstknight

I need some eagle-eyes to check I am not about to do something unwise.

My tracker mortgage with a building society is about to come to the end of its tracker period and revert to the base mortgage rate. The tracker was from a while ago, and pegged at 0.23% above BOE - not as good as it might sound as the building society invoked some small print and stopped tracking below 2%, but 2.23 is still not bad given where it started. As the tracker period is up I started to research moving provider, probably to another variable or tracker. Obviously rates are not as competitive this time around.

I managed to find several around the 2.9 or 3% mark variable, and the best tracker i could find was +2.04%. All of these came with a hefty fee of between £750-£1000.

On checking my exact balance with the encumbent (approx £265k on a property worth double that), it transpired that when the 'deal' expires I would revert to the BMR, which is currently 2.5%. Since this is competitive with the best rates I could find by switching, and is furthermore not subject to a fee (or the hassle of remortgaging) this looks the best deal. Obviously as interest rates rise, so will my repayments, but that would be the case with variable or tracker competitor products anyway.

Am I missing something, or is my best bet to stay put? Is there any reason to assume my building society's BMR will rise faster than BOE rates, or other variable rates?

Thanks in advance for any advice/comment

[Deleted User]

I am in exactly the same position as you except that my mortgage is much lower at £35K. If Nationwide stick to their agreement regarding the base mortgage rate then it can not rise any faster than the base rate. This is because it is already 2% above base rate and is guaranteed to be no more than 2% higher.
I have even less reason to move than you with my mortgage being so small because any move would have to be fee free to make it worthwhile anyway. I'm staying put.

KarenBB

Nationwide have scrapped the BMR as the default for their new products. If you took a tracker or fix with them now you'd go onto their new variable rate which is 3.99% that's something else to think of.

I thought that was high but I've just read that Skipton are increasing their SVR from 3.5% to a whopping 4.95%, that's more than a bit high with BOE base at .5%

Thrugelmir

Best life time tracker rates are currently with HSBC for 40% plus equity.

BMR is not a guaranteed rate.

There is no certainty at the moment. Lenders will be adjusting their interest rates to balance their own loan books. So there will be broken promises. Ultimately its a personal decision.

firstknight

Thanks all. From feedback so far it doesn't sound like it's a stupid choice. It may work out, it may not, but seems reasonable. Karen, am I right in thinking the BMR is only scrapped for new mortgages, so broken promises aside, I should stay with the more advantageous BMR and would only switch to the SVR if I changed to another NW product?

dimbo61

The 2.5% BMR is a very good rate that you are going onto and the only thing I can add is to make sure you build up your ISA,s each year.
Hope you are on a repayment mortgage ?

KarenBB

firstknight wrote: »

Thanks all. From feedback so far it doesn't sound like it's a stupid choice. It may work out, it may not, but seems reasonable. Karen, am I right in thinking the BMR is only scrapped for new mortgages, so broken promises aside, I should stay with the more advantageous BMR and would only switch to the SVR if I changed to another NW product?

I've been all through my mortgage file for the details of the BMR guarantee but couldn't find anything. DH's mortgage was on the SVR when Nationwide introduced the BMR in 2001 non of the correspondance mentions the guarantee so I've had a look around Nationwide's website and the quote below is from their website

"Please note: any mortgage products reserved on or before 29th April 2009 will revert to the Base Mortgage Rate (BMR). If you choose to switch to a new Nationwide mortgage product, the new product will revert onto our Standard Mortgage Rate (SMR).
Both are variable rates which we may vary in accordance with our mortgage terms and conditions. However, the BMR is guaranteed to be no more than 2% above the Bank of England base rate, whilst the SMR has no upper limit or cap. If you choose to switch to a new product, it is not possible to switch back to the BMR at a later date."

I can't see that Nationwide would break the promise on the 2% guarantee as there'd be lots of complaints and cases going to the ombudsman.
If you get the BMR you can keep it but once you've taken a new product it's gone forever and you get the SMR -the latest variable rate for Nationwide. That's the 3rd variable since DH took mortgage.

firstknight

Thanks Karen, seems like it is relatively safe then.

Dimbo, I'm currently interest only as the long term plan is to pay-off the capital through SAYE scheme (just waiting for the share price to go up). If all else fails we can down-size when market conditions are right. Switching between Interest and Repayment is free with NW, so if I deicde this is the wrong bet then I can switch back at any time. Currently I am enjoying having the extra monthly disposable income.