Remortgage or SVR?

mrsJef

Hi guys,

I'll try to keep it brief! coming to the end of a 2 year fixed rate wih RBS & not sure what to do for the best, feels like the last 2 re-mortgages/moves have been wrong way and we've fixed when the rate the dropped & wa variable when it went up!! So
House price -£221000.
Mortgage - £213900.
25 years left on mortgage!
We have been paying £1077p/m on a fixed rate split Repayment & Interest only.

Now RBS have offered 2 yr fix - 5.49% - £1054p/m
5 yr fix - 6.09% - £1155p/m
or SVR currently 4% - £808P/M

Now my head is saying svr and overpay the extra each month but then what if the rate increases like it did last time?

Also, when we took out this mortgage my husband was sole earner and we got nearly 5 X earnings. He is currently working self-employed since being made redundant but i am slo now earning p-time. Will this impact on who will lend & how much?

Thanks guys all advice welcome!

Thrugelmir

Personally I would take the overpayment route. By fixing you are not making inroads into the interest only element of your mortgage. At some point in time you will need to find this money. Far easier to pay relatively small monthly amounts than a lump sum.

I understand your concerns about rates rising. However it is worth remembering that as the capital balance owed reduces so does the interest element. Over time your monthly repayments consists of a progressively higher capital element and lower interest element.

lynnexxxo

I disagree with Thrugelmir. Given your high ltv rate (over 95% based on your figures), and the fact that your husband is now self employed and that you borrowed 5x his salary I would say that if you can fix and afford the repayments I'd go for that.

Interste rates are unlikely to stay as low as they are for much longer, we are already seeing inflation and interest rates will have to go up. And as much as mortgage lenders are tardy in lowering their rates, they are pretty quick at raising them.

Thrugelmir

lynnexxxo wrote: »

I disagree with Thrugelmir. Given your high ltv rate (over 95% based on your figures), and the fact that your husband is now self employed and that you borrowed 5x his salary I would say that if you can fix and afford the repayments I'd go for that.

Interste rates are unlikely to stay as low as they are for much longer, we are already seeing inflation and interest rates will have to go up. And as much as mortgage lenders are tardy in lowering their rates, they are pretty quick at raising them.

So how would address the issue that part of the mortgage is interest only? Defering an issue is not solving it.

Interest rates have to rise 2% before the 5 year fix breaks even. Every month that passes that base rate doesn't change, the higher it would have to rise even higher to make financial sense.

The lower the LTV the better the obtainable mortgage rate. Something that should be considered.

happyrichard

To through my ideas into the ring, we are in a similar position, however we have a much better LTV. We have decided to stick with the variable rate on the mortgage term. It gives you extra flexibility- if you decide to move or something else happens- i.e. no break clause in the variable term. Also, although interest rates will rise at some point, who knows when and how much. I for one would be surprised to see interest rates rise by over 2% in the next couple of years.

Hope that is helpful, but in the end it is a very personal decision. Only you know what would feel comfortable with regards your financial situation!

Thrugelmir

happyrichard wrote: »

To through my ideas into the ring, we are in a similar position, however we have a much better LTV. We have decided to stick with the variable rate on the mortgage term. It gives you extra flexibility- if you decide to move or something else happens- i.e. no break clause in the variable term. Also, although interest rates will rise at some point, who knows when and how much. I for one would be surprised to see interest rates rise by over 2% in the next couple of years.

Hope that is helpful, but in the end it is a very personal decision. Only you know what would feel comfortable with regards your financial situation!

So have you choosen to overpay your mortgage while interest rates are so low?

happyrichard

Our circumstances are different to mrsJef it should be stressed, but we have been overpaying on our current deal and will look at it again once we see what is happening on the variable rate. When our deal ends we don't go on to SVR, but rather 1.99% above base tracker- so this is variable, but slightly constricted. We probably will overpay on it as we are lucky to have a good disposable income, but like I said before, we will need to look at exactly how things are panning out.

mrsJef

Thanks guys I appreciate hearing other peoples opinions. Would be interested to hear from a mortgage advisor on what their predicions concerning the interest rates are, how quickly they think they will go up etc...
Thanks again to those already commented.x

lynnexxxo

Thrugelmir wrote: »

So how would address the issue that part of the mortgage is interest only? Defering an issue is not solving it.

Interest rates have to rise 2% before the 5 year fix breaks even. Every month that passes that base rate doesn't change, the higher it would have to rise even higher to make financial sense.

The lower the LTV the better the obtainable mortgage rate. Something that should be considered.

I never noticed the part that they pay part interest only, sorry.

I'd say it depends on the OP's situation, what can you afford each month?

If I was the OP my concerns would be that historically the SVR is higher than most fixes and would worry that the SVR would get to a level which was unaffordable and at that point there would be a scramble to get on a fixed rate (as everyone else on svr realises that its getting too expensive) and that fixed rates would not be great, or even possible for someone with a very high LTV and an OH who is self employed and has only been for a short time so not going to have years of profitable books.

I suppose ideally stay on the SVR and watch for it starting to rise (assuming they can 'hold' the fixed offer). And start overpaying too - as much as you can afford.

mrsJef

Thanks guys, i suppose my concern is that if we pay SVR and then in 3 months time the rates start climbing, will we still be able to get a fixed rate? I've been told no-one will want to touch us as we are 96% LTV so should we fix and is 5 years too long? We seriously need to overpay but the 5year plan is already £100p/m more than we are paying already and that is a stretch in itself so if we fix at that we would find it tricky to make any overpayments to ensure we are under 90% next time we re-mortgage!
Phew! It just makes my head want to explode!

Would still appreciate some advise from any financial advisors lurking on here!
Thanks.x