Fixed rate ended...what to do?!?

bicster

Howdy money savers,

I have a little dilemma that I wanted some money saving help with.

I am coming to the end of my fixed rate mortgage period. It was at 5.15% for three years and I now have a £139k mortgage remaining on a house worth about £160k.

My monthly payment is dropping from £804 to £588 as Nationwide are putting me on their standard variable rate deal.

The thing is; I have a loan with the bank to pay off (about £5k remaining at about 6%) so the question is...

- do I keep my monthly mortgage payments at fixed rate (i.e. overpay by £216 each month) and plod on with the loan?

or

- put that extra money in to paying my loan off early (given that £216 is nearly what I pay a month for it at the moment)?

or

- should I re-mortgage to get back onto another fixed rate and use any money I save to pay the loan off early?

What do we think people???

Thanks!

Chris

anandp

Hi Chris,

From my perspective, its a no brainer.

Put any extra cash you have into paying the loan off first. Its the higher rate and unless it is being serviced separately by an investment or business venture, it should be the first one you should reduce.

After that, any remaining money should go into the mortgage.

I think the above for 2 reasons:
1. I assume the Nationwide SVR is quite a bit lower than 5% at the moment
2. Being quite into my property investments, I do not expect mortgage rates (SVR's at least) to increase substantially for quite some time yet (though this is purely my opinion)

Good luck bringing that debt down!

Anand

bicster

Thanks Anand, you kind of confirmed what I was thinking - which is great! :j

Nationwide's SVR is 2.5% at the moment. My big concern with trying to wipe the loan out is the threat of interest rates rising; they're going to have to rise sooner or later (and I suspect they'll go quite high quite fast) so I don't want to get trapped into a high fixed rate when I could have fixed it sooner...if that makes sense!

Chris

anandp

They will go up but I don't think they'll move much higher for another year or so, mainly because banks seem to be making large margins at the moment, so if the BoE were to raise rates, the actual rates charged by the main lenders may become too expensive for consumers, stifling the market once more...