Fixed Mortgage Rate Ending

blobby1982

We presently have a mortgage at a rate of 5.29%. Our payments are set to reduce by £200/mo when we transfer to the standard variable rate. However we like to know what we are paying and therefore in an ideal world would like to continue with a fixed rate.

The problem is the best deal our lender is offering is 6.69% as our loan to value is 85%. To access the affordable rates we need a LTV of 75% or less.

Part of me really wants to protect my family with a fixed rate - but it just doesnt seem to make sence to increase our mortgage outgoing by an extra £100/mo plus a booking fee. I am annoyed that our lender is being so irresposible and almost forcing us into a variable rate as this is the more affordable option - yet risky in my view due to the fluctuating cost - this seems irresponsible. It seems we are being penalised for being good resposible customers.

Any suggesttions - what would you do - let it revert to the variable rate and save money (all be risky) or fix it at this daft rate.

opinions4u

blobby1982 wrote: »

We presently have a mortgage at a rate of 5.29%. Our payments are set to reduce by £200/mo when we transfer to the standard variable rate. However we like to know what we are paying and therefore in an ideal world would like to continue with a fixed rate.

Welcome to the board.

It would help posters if you told us who your lender is and what their SVR is.

The problem is the best deal our lender is offering is 6.69% as our loan to value is 85%. To access the affordable rates we need a LTV of 75% or less.

Priced according to the risk of lending in the current climate.

Part of me really wants to protect my family with a fixed rate - but it just doesnt seem to make sence to increase our mortgage outgoing by an extra £100/mo plus a booking fee.

So go on to the SVR, but overpay the mortgage with the amount that you would have been paying on the higher fixed rate. This means that you will be able to adjust easily as and when rates move up and also have spent time reducing your debt - making it more likely that you can get on to a 75% deal sooner rather than later.

I am annoyed that our lender is being so irresposible and almost forcing us into a variable rate as this is the more affordable option - yet risky in my view due to the fluctuating cost - this seems irresponsible.

The price will reflect how much they pay their wholesale funders. It would be more irresponsible of them to lend with very little margin at this stage of the economic cycle.

It seems we are being penalised for being good resposible customers.

You may be a responsible customer, but at this point in time you are not a good customer. Not through any fault of your own, but simply as a result of the impact of house prices on your LTV. Not saying that you're a bad customer either - just not perfect.

Depending on the rate, I'd go variable and overpay.

But check out what remortgage offers are available at a comparison site like www.moneysupermarket.com.mortgages first.

getmore4less

If you wanted long term fix why did you not fix for longer?

Take the SVR then overpay by the £200pm saving and the £100pm it would cost you to fix and with the fees you would have paid.

Chances are you will be ahead for at least as long as the fix you were planning.

Radiantsoul

Fixed rates seem pretty expensive at the moment so I would probably stay on the SVR and overpay.

blobby1982

This advice seems to tie up with what most people have suggested - I guess a lot of people are in a similar position and we are not on our own - I guess you simply cannot mitigate against all risks in life and sometimes you just have to do the best you can and make the best choices based on the options presented.

As a seperate note - we did fix for five years - I cannot see any other fixed term offers longer than this - we ported the mortgage to the new house, its just the five year fix had ended - if I could fix it for the life of the mortgage we would have done.

For info it was HSBC.

Just another quick question - assuming we do go onto the SVR and overpay - when we do come to try and fix it again in the future will the banks likely increase the fixed rates rates on offer as soon as they start to see the base rate rise (which it must do at some point soon) - in which case will this make going over to a fixed in the future out of reach??

Thanks .

opinions4u

As a seperate note - we did fix for five years - I cannot see any other fixed term offers longer than this - we ported the mortgage to the new house, its just the five year fix had ended - if I could fix it for the life of the mortgage we would have done.

Britannia often have a 10 year fix available. Not sure about your LTV qualifying though.

For info it was HSBC.

Not the best SVR - somewhere over 4% if my memory serves me correctly.

Just another quick question - assuming we do go onto the SVR and overpay - when we do come to try and fix it again in the future will the banks likely increase the fixed rates rates on offer as soon as they start to see the base rate rise (which it must do at some point soon) - in which case will this make going over to a fixed in the future out of reach??

A toughie. Fixed rates didn't really change much as the BofE rate fell. So it's by no means clear what will happen to fixed rates as the BofE rises again. The two aren't directly linked.

This link to Swap Rates gives you some idea as to what is happening with the cost of fixed rate money (add 2%-3% on for the cost of a residential mortgage!).

What you've done is identify the big risk of the SVR strategy. What nobody can do is answer your question without a crystal ball!

mac24

blobby1982 wrote: »

Just another quick question - assuming we do go onto the SVR and overpay - when we do come to try and fix it again in the future will the banks likely increase the fixed rates rates on offer as soon as they start to see the base rate rise (which it must do at some point soon) - in which case will this make going over to a fixed in the future out of reach??

Thanks .

5 years ago i fixed at just over 5%.Base rate was at 4.75%.There was a lot more competition about at that time though.Just have to hope banks start lending a lot more freely i suppose.But on the other hand that is one of the reasons the economy got in such a bad state.

blobby1982

Interesting all - thanks for your help. Still not sure what we will do - we have a few weeks before we need to decide so some thinking time ahead.