6.79% fix for 5 years - opinions?

Bexter

As per title, we've been offered an AIP from HBOS with a fix of 6.79% for 5 years - fee £495 - LTV is high - 90% on a £200k mortgage. Just wondering what anyone's thoughts on this were - I know there are lower rates around for shorter term fixes but we're quite happy to pay a but more for longer term security. However haven't found a property yet so rates may change again by the time we do - though we'll move quickly when we see the right place so I hope it'll be in next 2 months. Thought we may struggle to get a mortgage anyway in current market - want a good deal but obviously don't want to end up doing loads of applications. Any opinions please?

TBeckett100

the rate is a little on the high side. within the next couple of years, whilst bank of englad base rate remains low I expect more sensible rates for 90% mortgages coming back in. I would go on a tracker or disc for a couple of years and then assess. Also you could overpay for a couple of years and pretend your mortgage is that high to a) get you used to it and b) get your LTV down. At 80% you can get 5.04% with Chelsea.

I am currently wondering if 5.04% is a good deal. for me, I plan to have another child so this would take them both up to schooling, a critical time where i need to know my outgoings. I know I will be paying over the odds for the next 3 years but i see the last 2 years of that fixed rate being worthwhile, it brings peace of mind.

As I tell everyone, mortagage borrowing has to be done what is right for you. never try and play the market unless you can afford the downside.

Thrugelmir

Ultimately its affordability of the mortgage that matters. In 5 years you will have repaid little capital back. So interest rates were then 8 or 9% could you comfortably afford the repayments.

Leveraging up on a high LTV is always a risk. Particularly in the current market where there is little upside for property in many areas.

Personally I would raise a higher deposit before purchasing. As at the interest rate you quote, your mortgage will cost you £195k in interest over 25 years. Thats a lot of after tax income.

herbiesjp

You don't say what multiples you are looking at.

But you can find lower fixed rates, which might make the decision easier, or harder depending on your point of view . For example a 4 year (which might be a good compromise for you) at 5.99%

tez_c

I'm also looking for a new fixed rate as mine ended and on a variable rate but given the BoE rates at the moment it might be worth me staying as I'm only on 1% above BoE and I doub't I'll get a fixed rate that low.

Boozer

tez_c wrote: »

might be worth me staying as I'm only on 1% above BoE and I doub't I'll get a fixed rate that low.

Might be worth?????

Most people would kill for a mortgage at 1% over base rate, lucky you.

Bexter

Hmm - good information thanks.

Herbiesjp - can you tell me who that 4 year rate is with please? Also, we were concerned as A&L only offered us £150k on their affordability assesment, no credit check - HBOS actually did a soft search plus affordability and offered £248k. I keep reading that Halifax are a bit easier on their credit scoring -I'm just worried about getting declined once we've actually made an offer on somewhere. We seem to have quite low credit scores though our files are clean.

We currently pay £1k a month rent anyway - and the £180k is less than 2.5 times our combined income.

getmore4less

£72k+ thats a take home of £4k-£4.4k

Save a bit longer and get the LTV down a bit should be able to save £1.5k-£2.5k pm

Obvious question, why such low savings on this income.

Could you rent somewhere smaller/cheaper to increase the savings/deposit even quicker.

Bexter

To be honest, I didn't post this to get opinions on how much we should have saved up or could save up! This seems to happen every time I post on the forum these days. getmore4less - how can you suggest what we should be able to save when you don't know what our outgoings are?!

I don't think it's an obvious question why we have a 'low' £20k deposit - but since you ask, we have a baby, I've been on mat leave, we are paying some debts off - but ultimately, we want to buy to get some stability instead of running the risk of having to move every 6 months with a wee one, as can happen when renting.

Alisonb1975

We got a good 4 year fix fee free at 4.69 with the Principality BS. They have been very good. we have a low LTV so not sure what it would be at 90%.

getmore4less

Thing is if you want decent rates you either need to build up a bigger deposit by saving more before you buy or overpay a lot if you buy to get LTV down to get the reasonable rates.

Interest only £200k at 5% will be costing £800pm on that 6.79% £1132pm

Thats just the interest and similar to your rent

If you have not managed to save a decent deposit and are paying debts with rent at £1k then how are you going to find another £20-£25k over the short term(2y-5y) to get a better deal next time and even then we are still looking at 80% 75% deals if you save the higher end.

House prices drop a bit and you need even more so potentialy you are stuck on another high rate deal or the follow on rate.

These days you can't depend on rising wages and house prices to improve the situation.

Life style choices are yours but if your new priority is getting a house and stability then you might want to review your spends and priorities to reduce the risks going forward.

Have you done the "what if" for another baby and more maternity leave?