Any Advice?

Jake_20

Hi, I'm just seeking some opinions on our current situation regarding our Mortgage as our Fixed Rate is due to be up very soon. Here is our situation.

• Mortgage is with Chelsea Building Society on a repayment basis.
• Its was fixed for 3 years at 5.49% - this ends June 1st 2010.
• Term was 30 years and we will after this fixed rate have 27 years left.
• Currently owe £102,500.00.
• Halifax recently valued the house at 110,000.00 when we was enquiring about a product with them, however we thought it was about £115,000.00.
• Currently pay £606.00 a month.
• My income is £25,000.00 and my partners is £15,000.00 (She works part time due to having our first child in June 2008).
• We have one loan commitment with a remaining balance of around £3,000.00 and pay £147.00 a month, (this is with Lloyds Bank).

Although we have an LTV of around 92%, we do have some money from savings etc, and would have the option to be able to get around £9,000.00 to get to 85%, however we are reluctant to use a lot of this money as its really in the form of inheritance/emergency funds.

However would it be worth risking using these funds to put into our mortgage and lowering the rate and keep paying the amount we budget for (£606) therefore overpaying each month? OR Stick to the 92% and go automatically onto Chelsea's SVR 5.79% currently?

If we do use the money to get our 85% LTV:

Offers so far:
Halifax:

85% LTV
fee's in total of around £1,000.00 added to mortgage
Rate 4.490% above BofE base rate - so currently 4.990% - 2 years
Or fixed rate of 6.89% with a £995 fee - (3 years I think!) - @ 90%

Leek Building Society: - see attached email. (Mortgage Enquiry)
85% LTV
fee's in total of around £1,000.00 - this includes a HLC.
SVR minus 2.24% for 2 years - currently 2.95% - (SVR currently: 5.19%)

I hope this gives you an idea, although it seems the best option we are a bit apprehensive about a tracker on SVR or against the Bank of England due to hearing stories about the rates going to shoot up to 8 or 9% after the election.

Thanks in advance for any advice or thoughts.

Cannon_Fodder

Keep an emergency fund. Maybe use £2k or whatever is necessary to get to 90%, if shopping around finds a Fixed deal better than 6.89% with lower fees.

If you can't find one, you might as well stay on the SVR for 6 months.

Paying £1k in fees to get a Tracker, when rates will be going up within the year (imo) is not the right choice.

Thrugelmir

Clear the Lloyds loan as a priority. This will free up £147 to increase your mortgage repayments by.

Why not shorten your loan period by a few years once the fixed period ends in June, and increase your fixed mortgage repayment.

On such a long mortgage term you are reducing your capital balance owing very slightly. Whilst the thought of higher rates in the future is worrying. The sooner you can reduce the capital balance the less your mortgage will increase if rates were to rise.

MortgageMan_2

Hi Jake, First post on here - but a mortgage broker for many years...

Without carrying out any comparable research, my first thoughts are that the SVR with the Chelsea BS was one of the slowest reducing SVR's on the market when the rates came tumbling - therefore, it would be reasonable to expect them to be one of the slowest rising SVR's when the BOE rate starts to rise.

If we take the Halifax property valuation estimate as realistic, then 'ploughing' loads of savings/emergency money into your debt - with sole aim of getting a better deal is not recommended. The Halifax deal will cost you £999 in set up costs - and the rate of 4.99% does not put you in a better position - especially when it is a Tracker (I think the Chelsea SVR will rise slower!).

Regarding the Leek BS deal - great rate...but I notice that there is a HLC (Higher Lending Charge) payable for customers when the loan exceeds 75%...again, need to find out how much this is? HLC's can be well over £1000 and will therefore affect the overall value for money on that deal.

Whilst it is good to have lots of equity in your property, smashing 'emergency' money into the mortgage is not always a good idea when the rewards are not there - especially when you have a young family!

Be careful!

dwsjarcmcd

Personally I wouldn't touch a 2 year tracket @ 4.49% above base with the proverbial bargepole! That really is a one way bet and you lose. I also don't see the point of the Halifax's fixed deal.

That leaves the Leek product and if the fees including the HLC are £1k as you say, I would either go for that or continue to look.

The other posters make good points about the emergency funds, but that leaves you with the Chelsea's SVR.

Personally I would do as Thrugelmir suggests and clear the £3k loan and shorten your term to 22 years.

opinions4u

MortgageMan wrote: »

Without carrying out any comparable research, my first thoughts are that the SVR with the Chelsea BS was one of the slowest reducing SVR's on the market when the rates came tumbling - therefore, it would be reasonable to expect them to be one of the slowest rising SVR's when the BOE rate starts to rise.

I don't think reasonability comes in to it when a lender's balance sheet is at risk.

They have too many mortgages and not enough savers. While this remains the case they will quite willingly move their mortgage rates up as far as commercial pressures allow them.

Until the balance between savings, wholesale funding and mortgages is corrected Chelsea will raise their rates as fast, if not fast, as others.

If we take the Halifax property valuation estimate as realistic, then 'ploughing' loads of savings/emergency money into your debt - with sole aim of getting a better deal is not recommended. The Halifax deal will cost you £999 in set up costs - and the rate of 4.99% does not put you in a better position - especially when it is a Tracker (I think the Chelsea SVR will rise slower!).

Regarding the Leek BS deal - great rate...but I notice that there is a HLC (Higher Lending Charge) payable for customers when the loan exceeds 75%...again, need to find out how much this is? HLC's can be well over £1000 and will therefore affect the overall value for money on that deal.

Whilst it is good to have lots of equity in your property, smashing 'emergency' money into the mortgage is not always a good idea when the rewards are not there - especially when you have a young family!

Be careful!

Excellent post. Welcome to the forum.

Jake_20

Thanks for all your advice and opinions I think we will carry on looking around for any more offers/deals.

dimbo61

Have a look at the 5 year fix with YBS at 5.69% with a 15% deposit
Long term security while child/childs young

herbiesjp

Personally at that LTV I would look to fix.

If you are happy with a shorter term fix you could be looking at just under 5% - otherwise longer term would be slightly higher.

That is looking at 85%LTV.