Oh what shall I do?!?!?!

myfairlady

Hello guys,

I'm in two minds with what to do, can you offer some advice please? (I think I just need to talk it out with someone!)

2 year fixed rate is coming to an end (March) and I'm unsure what to do. We fixed at 5.49% on a £225,000 interest only mortgage. When the deal ends we go onto the base rate. Now my question is would we be better off getting a new fixed rate or should we stay on the base rate for a while and get some of the credit card debts down?

I guess I want someone to look into their crystal ball and tell me when they think the rates will rise. Am I right in thinking that when the base rate rises that the fixed deals will rise too?

Sorry if this post is all over the place but i just want to hear what people's views are on the interest rate situation.

Thanks guys.

[Deleted User]

Who are you with and what rate will you be moving onto?

rothers

Is that the Bank of England Base Rate without any add on or is it the Standard Variable Rate? Is that for the term of the mortgage?

Cannon_Fodder

Get rid of your debts.

myfairlady

Hi guys, Thank you so much for the replies. Okay, I've spoken to the Coventry who have confirmed that after my 2 yr fixed ends I will go onto 1.35%.

We are currently on interest only and I was hoping to put it onto a repayment. But now Im wondering if I would be better off getting rid of the debt first and then going to repayment on a fixed???

Ohhhh, so confused Crystal ball anyone?

[Deleted User]

myfairlady wrote: »

Hi guys, Thank you so much for the replies. Okay, I've spoken to the Coventry who have confirmed that after my 2 yr fixed ends I will go onto 1.35%.

We are currently on interest only and I was hoping to put it onto a repayment. But now Im wondering if I would be better off getting rid of the debt first and then going to repayment on a fixed???

Ohhhh, so confused Crystal ball anyone?

So your going from 5.49% fixed to 1.35% variable?!!
If what you say is correct then your payments will go down from around £12000 to £3000 per year! For me this would be a no brainer - an extra £9000 per year to use to pay down my debts and then move onto repayment. Are you sure though that the 1.35% figure is correct?

Thrugelmir

myfairlady wrote: »

Hi guys, Thank you so much for the replies. Okay, I've spoken to the Coventry who have confirmed that after my 2 yr fixed ends I will go onto 1.35%.

We are currently on interest only and I was hoping to put it onto a repayment. But now Im wondering if I would be better off getting rid of the debt first and then going to repayment on a fixed???

Ohhhh, so confused Crystal ball anyone?

Tackle most expensive debt first. Little point fixing and switching mortgage to repayment basis if you have credit card debt.

When base rates rise all interest rates will rise. Credit cards will be no exception.

myfairlady

CR10 - It seemed really low to me! I asked again and she confirmed that the rate is made up of base rate plus 0.85%.

We have 10k debt so at your calculation we could clear it in a year (but thats working on the basis that there are no rises!).

I think my only concern is that the mortgage is high and I don't want to get into a situation where Im fixing at a high rate. But, if we could clear some of our debt it would be easier to pay. Catch 22 I guess.

Thank you all so much for your help. Its great to be able to talk this through.

Thrugelmir

myfairlady wrote: »

I think my only concern is that the mortgage is high and I don't want to get into a situation where Im fixing at a high rate. But, if we could clear some of our debt it would be easier to pay. Catch 22 I guess.

Pay a visit to some of the other forums to tackle your debt.

Although there's lots of focus on interest rates currently. For many there will be a squeeze on disposable income in the years ahead. Low wage inflation, tax rises, higher energy costs etc.

So now is a good time to start to get financial affairs in order.

redpete

Interest rates will go up, but there is a chance that fixed rates will drop before then or stay the same when base rates increase.

You will see equally certain forecasts that rates will stay low for at least a year or 2 and that they will go up sooner than that. There is equally no concensus on how much or how quickly they will go up when they start to increase.

As your payments are interest only how do you intend paying off the capital when you have to?

It is likely that variable rates based on base rates will take a bit of time to get up to the 5.49% you have been paying, but once they do the fixed rates you can get then will almost certainly be higher as well. So can you afford the risk of payments going above 5.49%, or do you need the certainty that fixed will give?

In the short term it is probably worth paying off the higher rate debts as long as you won't run the risk of defaulting on mortgage payments.

myfairlady

redpete wrote: »

Interest rates will go up, but there is a chance that fixed rates will drop before then or stay the same when base rates increase.

You will see equally certain forecasts that rates will stay low for at least a year or 2 and that they will go up sooner than that. There is equally no concensus on how much or how quickly they will go up when they start to increase.

As your payments are interest only how do you intend paying off the capital when you have to?

It is likely that variable rates based on base rates will take a bit of time to get up to the 5.49% you have been paying, but once they do the fixed rates you can get the will almost certainly be higher as well. So can you afford the risk of payments going above 5.49%, or do you need the certainty that fixed will give?

In the short term it is probably worth paying off the higher rate debts as long as you won't run the risk of defaulting on mortgage payments.

Thank you so much Redpete and Thrugelmir.
I am trying very hard to get my finances in order (after a rocky couple of years!).
We went on to interest only mortgage to keep the payments down whilst I was on maternity leave with a view to going straight back on to repayment. But of course life is never that simple and our finances did not allow us to do that....

So, current situation. We can pay interest only but would stretch ourselves to go onto a repayment fixed at 6%. My other question is at what age is the cut off for taking out a 25 yr mortgage? Is it based on the fact that retirement is 60 and 65?

Thank you all once again for your help, it is really appreciated.