Abbey offering new deal with no early repayment charge

Threadhead

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Yoges

I guess I got the same letter from Abbey as you did! To be honest, I'm a little bit underwhelmed with the offers but overwhelmed at the choice.

For the record, I owe £90K on a property I estimate to be worth at least £150K (£167K according to Zoopla) so LTV should be better than 60%. Currently on five year fix at 4.99% due to end in June 2010. I overpay by £300 a month.

The offers I received were:

2 yr trackers at 1.99% above base with £999 fee or 2.49% above base with £599 fee
3 yr trackers at 1.99% above base with £899 fee or 2.49% above base with £100 fee
Lifetime tracker at 3.29% above base with £899 fee.

18 mth fix at 5.49% with £100 fee
2 yr fix at 3.49% with £999 fee or 3.99% with £100 fee
3 yr fix at 4.24% with no fee
4 yr fix at 4.69% with £100 fee
5 yr fix at 4.99% with £100 fee.


I suggest you put the numbers through Locoblade's excellent spreadsheet before making any decisions (I can't post a link to the spreadsheet but search for username locoblade in the mortgage forum to find it).

I like the idea of a tracker but when First Direct are offering a life time tracker at only 1.89% with £999 fee and no ERC, Abbey's offers don't really compare. The 2.49% tracker + £100 for three years is tempting though.


Does anyone know if Abbey come back with other offers after their deadline has passed?

kmmr

The important question here is what are you giving up to get this deal.

What is the SVR that you would automatically drop onto at the end of your current fixed rate? And then, what is the SVR at the end of the 2yr new fixed term.

ie - new deal can mean a difference after the fixed rate period. Since you have 23 years left you need to try to look at the full life of the loan.

For example, one of the big lenders has an SVR of Base +2.0. They are offering new deals which have nice tempting fixed rates for 2 years, but when you then finish that two years, you go onto an SVR which is Base + 4.0 (or whatever).

Spangled

Threadhead wrote: »

We currently have our mortgage with Abbey - Its part interest only 60K (endowments hopefully will cover this) and part repayment 58.5K, on a fixed rate til June 2010 at 5.89%. Still another 23 years to pay total.

Abbey have offered to waive our early repayment charge (£3550) if we change *now* to one of their new mortgages - either a 2yr fixed at 3.89%, or a 2yr tracker at 2.49% above the base rate. (our choice is not limited to a 2yr deal, but we find that works well for us)

Having had a quick look about, I know there are better rates out there, but no idea how to figure out whether going for a new mortgage now is a good plan or not.

Hopefully there is enough information in this post for someone to give me some helpful advice.

Although on the face of it Abbey waiving the ERCs seems like a good offer, you've only got four months to run on your current tie-in.

You could easily hunt for a (better) deal with a different lender now but set the start date for 1 July (or whenever your current deal ends), thereby incurring no ERCs from Abbey.

Of course, switching to another lender begs another set of questions: what is your LTV? Would your current income support the mortgage (there would be no income check if you stayed with Abbey)? Have you had any defaults since you took out your current mortgage? etc

HSBC are doing BoEBR +1.99% lifetime trackers (and with no ERCs - info here) and First Direct always seem to have reasonably competitive fixes - including a two-year fix at 3.29%.

Threadhead

Yoges - Thanks for the heads-up for Locoblade's spreadsheet, thats very helpful. I agree that Abbey's offers are pretty underwhelming.

kmmr - I dont know what SVR we would be changing to; our paperwork says it was 7.34%, but since that was 2 years ago, I imagine thats out of date. We tend to look for a new deal as soon as the old one is due to come to an end, so have never really bothered worrying about what the SVR is (this could be naive of us though?)

spangled - I agree - My initial thought was that we are not "saving" the ERC, as its only valid for another few months. I just worry that in June, when we sort out a new mortgage, will we get a rate as low as 3.89%? (ie will mortgage rates shoot up?) Again, this may be naive; I'm not very switched on in these matters.

LTV is about 65%, no defaults, and income covers this.

Thanks for all your help.

Spangled

Threadhead wrote: »

spangled - I agree - My initial thought was that we are not "saving" the ERC, as its only valid for another few months. I just worry that in June, when we sort out a new mortgage, will we get a rate as low as 3.89%? (ie will mortgage rates shoot up?) Again, this may be naive; I'm not very switched on in these matters.

LTV is about 65%, no defaults, and income covers this.

With 65% LTV you'll have a good pick of mortgages. If you can pay down your mortgage to less than 60% you'll have an even better choice as a lot of the best details are for 60% LTV or better.

No one has a crystal ball but the general consensus (and my opinion too, for what it's worth) is that the BofEBR will stay at 0.5% for at least another six months, maybe even to the end of the year. I just can't see it shooting up by June so the mortgage deals similar to that available now should — broadly speaking —be available then. But like I said, no guarantees...:)

As kmmr says, you should def check what rate you go to on your current deal with the Abbey once your fix finishes in June though.

Yoges

Threadhead,
The current Abbey SVR is 4.24% so there are definitely savings to be had by being tied in again.

What sort of fees have you been quoted for the two deals you mention?


I've run the sums for my mortgage and the total interest paid over the two years with fee included is...

2 yr tracker at 1.99% over base + £999 fee: £5,458
2 yr tracker at 2.49% over base + £599 fee: £6,016

2 yr fixed at 3.49% + £999 fee: £7,393
2 yr fixed at 3.99% + £100 fee: £7,488

2 yr on the current SVR at 4.24%: £7,892


I think I'll investigate the HSBC and First Direct lifetime trackers a bit more...

Threadhead

Yoges wrote: »

What sort of fees have you been quoted for the two deals you mention?
.

£125 transfer fee for either deal, which seems cheap compared to your fees.....

Spangled

Threadhead - is there a specific reason you have for going for a two-year deal? Again, no crystal ball but there's a general feeling that rates will rise in 2011 and beyond - which could mean rates being substantially higher just when you come out of your next two-year deal plus the hassle/expense of remortgaging.

If I were in your position, I'd be investigating either a five-year fix or a lifetime tracker.

Of course, if you have, for example, definite plans to sell your house in two years' time, then a two-year deal could be worth it. Good luck!

getmore4less

Yoges wrote: »

Threadhead,
The current Abbey SVR is 4.24% so there are definitely savings to be had by being tied in again.

What sort of fees have you been quoted for the two deals you mention?


I've run the sums for my mortgage and the total interest paid over the two years with fee included is...

1. 2 yr tracker at 1.99% over base + £999 fee: £5,458
2. 2 yr tracker at 2.49% over base + £599 fee: £6,016

3. 2 yr fixed at 3.49% + £999 fee: £7,393
4. 2 yr fixed at 3.99% + £100 fee: £7,488

5 2 yr on the current SVR at 4.24%: £7,892


I think I'll investigate the HSBC and First Direct lifetime trackers a bit more...

To do a proper like for like you need to make the payments the same on all the deals and see what is left after 2 year, it is not just the interest.

Based on your £90k over 20y the payment on the SVR would be the biggest at about £557pm putting that into the 5 options after 2years you have the followng left.

1. £81,948.65
2. £82,416.80 +468
3. £83,742.98 +1794
4. £83,679.89 +1731
5. £84,024.77 +2076

If looking at two years then I think the lowest cost tracker you can find is the way to go and overpay, in two years it is likely to stlil be best to stay with it, any other options will be higher then.

Yoges

To do a proper like for like you need to make the payments the same on all the deals and see what is left after 2 year, it is not just the interest.

Thanks for the correction - I can see the error in my calcs now!