Nationwide BMR

bjmurp

Hi, Can anyone throw a bit of advice my way?

My 2 year fixed with nationwide is up in a couple of months and i'll be moving from 6.2% to a 2.5% variable on a 140k mortgage. Is it worth fixing for another 2 or 3 years for that extra bit of security? at the moment we pay around £800 pm (as it's 40y mortgage) and this would reduce greatly on the variable rate but we've no room for error and can't pay any more than that. I would also like to reduce it to around 23 years to make sure it's paid off before i'm too old.

jacqhale

Hi, I can't offer you advice but we were in the same situation as you - moved to 2.5% last September on c 140K mortgage. We are now overpaying £200 a month and that's still just less than what we were paying on fixed (we were about 5.49% I think).
It's my personal opinion that I have no intention of fixing for at least a year. I do like the security of fixed and will go back on when rates start to go up but I would rather overpay now when general concencus seems to be that interest rates will stay low for at least another year. I'm pretty sure that even when rates do go up they won't jump straight from 0.5% to 15% in one month but I could be wrong in which case you win some you lose some!
We want to get our LTV ratio down as much as possible before fixing so we can hopfully get a better deal (we brought with 5% deposit so trying for at least 25% equity asap).

But it's all a gamble and depends on how 'safe' you want to feel.

Try one of the mortgage calculators on here (sorry not sure how to link to one) so you can play around and find something you are comfortable with.

SimbaSimon

bjmurp wrote: »

Hi, Can anyone throw a bit of advice my way?

My 2 year fixed with nationwide is up in a couple of months and i'll be moving from 6.2% to a 2.5% variable on a 140k mortgage. Is it worth fixing for another 2 or 3 years for that extra bit of security? at the moment we pay around £800 pm (as it's 40y mortgage) and this would reduce greatly on the variable rate but we've no room for error and can't pay any more than that. I would also like to reduce it to around 23 years to make sure it's paid off before i'm too old.

Your mortgage payment will go down to approximately £470 with the new interest rate. If you need the security of a fixed mortgage than yes see about getting another fixed rate product. If you feel like you want a a bit of risk you can go on the variable which is pretty good (I'm on the same :T) and save the remaining £330 which you used to pay. Either overpay the mortgage or put it in a savings account should the interest rates go up. But for your payment to go above what it is now interest rates will need to raise 3.7%, something I can't see happening anytime soon.

ginvzt

SimbaK2K wrote: »

But for your payment to go above what it is now interest rates will need to raise 3.7%, something I can't see happening anytime soon.

Did anyone predict them to drop from 5% to 0.5% in just what, 7 months? (September 2008 - 5%, March 2009 - 0.5%)

SimbaSimon

ginvzt wrote: »

Did anyone predict them to drop from 5% to 0.5% in just what, 7 months? (September 2008 - 5%, March 2009 - 0.5%)

I said I can't see it happening anytime soon which is why I'm sticking on the BMR. Its obviously interest rates will rise but when and by how much is a guessing game, and I'm willing to bet its going to stay low for atleast 2010 with possible a minor rise. If the OP wants security than maybe a fixed mortgage is for them but its worth doing some sums before hand to make sure its the right decision.

dimbo61

When you go onto the Nationwide BMR Currently 2.5% you could ask Nationwide to keep your mortgage payment the same as you are currently paying !
You have been paying this amount for the last 2 years and this will mean you are overpaying by £330 each month and building up an overpayment reserve!
If rates do start to rise they will have to go up above the 6.2% you are now paying before your mortgage payment would increase. GOOD LUCK

dimbo61

Paying £800 a month when your mortgage rate goes down to 2.5% would reduce your mortgage term to 18 years IF! the interest rate stayed the same.

Aletank

My 5 year Nationwide 5.2% fixed ends in April, I have just received a letter saying i will go onto the Nationwide BMR 2.5% (guaranteed to never be more than 2% above the BofE base rate)
The letter also says i could take out one of their fixed rates but if i do,after my fixed rate ends I will revert back on to the Nationwide SMR, currently 3.99% with no upper limit,it is not possible to switch back to the BMR at a later date.

Gorgeous_George

I would stick on the 2.5% BMR.

If base rates AVERAGE 4.2% or more over the next 2 or 3 years (that you suggest for a fixed rate) I would be most surprised. Rates were slashed because of the World financial meltdown. My best guess is that they will rise only when the problems are resolved - and not within the next two years or so. If they do rise, your mortgage payments are likely to be the least of your problems (and everybody else's).

Stick on BMR and save the difference in ISAs. Or look at longer term fixed rates (7 years +).

You could ask Nationwide for your options. If they don't mention sticking on BMR that should tell you what they think base rates will do.

GG

bzd

I agree with those saying stay on the BMR.

Others have speculated on what they think the BoE will do with interest rates. I have my own thoughts but I'm too much of an amateur to want to influence anyone with my own speculation!

Anyway, the BoE rate would have to go up to 4.2% (which is possible but, as others suspect, is highly unlikely) for you to start paying more than you currently are. So once on BMR you should put the extra you're saving into a savings account with more than 2.5% interest (after tax if it's not an ISA), or failing that, just overpay. When your mortgage interest rate goes over the savings interest rate (after tax) then dump the savings account into the mortgage (no restrictions to this if you're on the BMR). If you're on the BMR I don't think you need to ask Nationwide to reduce the term, you can just do it yourself by overpaying.

Since Nationwide introduced the SVR, you aren't ever going to get that BMR back if you switch to any other mortgage!

BTW I have two (because I moved house) Nationwide tracker mortgages which I'm sticking with!

Ben

Leew1231

It's a personal choice. I have had a similar thing and stuck with the standard variable rate they put me on. I pay more than the minimum, but still less than before and the outstanding value seems to be dropping at a decent rate.