Crazy low interest rate

[Deleted User]

Ok, i'm trying to find a mortgage at the moment for my first home, we're going to get an interest only mortgage for 2 year to start with, then remortgage and get a repayment one.

Can anyone tell me why the rate on this is so stupidly low?
http://www.portman.co.uk/mortgages/fixed_rate/mortgage_product_detail.asp?ID=1037

It's a '2 Year Fixed - with extended tie in' mortgage with a fixed rate of 1.99%

I don't get what the downfall is.. what does 'extended tie in' mean?

dmg24

The extended tie in means that after the two years you go back to the standard rate, which in this case is Bank of England base rate + 1.99%. If you choose to redeem your mortgage before 2012 (i.e. you're tied in for four years after the discounted period) then you have to repay a large repayment charge.

Perhaps you should speak to a whole of market advisor about your mortgage options? They'll be able to explain the pro's and cons of the various deals available.

MortgageMamma

bloody ridiculous deals like that get on my nerves. I'm sure lenders do it to suck buyers in, as they know full well that headline rates are what are mainly considered by buyers and not so much the T & C's and fee's

[Deleted User]

Well, it did seem a bit dodgy, that's why i asked

We're more likely to go with the A&L's 4.49% fixed rate, it costs a grand to start, but i think it works out cheaper in the end (think!). Personally, i know we've got enough money but i know my gf has never had to budget before so i want a wide 'margin of error'

MortgageMamma

how big is your mortgage? I might be able to tell you if thats worth going for or not

[Deleted User]

House is 200k, mortgage needed is 180k, between us we make 49K, expecting that to go up to > 52K in Sept when we both get payrises.

If it's of use, as well as the 20k deposit I've got 11K hanging around in an ISA.

MortgageMamma

you are likely to be beter with a mortgage that charges a reasonable arrangement fee, but what A & L are charging sounds horrendous. They are not very competitive of late. What is most important to you, marginally cheaper mortgage or quick completion? Are you looking to fix your mortgage payments? Are you going interest only or repayment and for how long?

[Deleted User]

We need a quick exchange, completion isn't a big deal, cheap initial mortgage is very important though. We want fixed rate, interest only, for 2 years. The plan is to put the money that we'd be paying in repayment into doing the house up

This is the A&L scheme we're looking at-
http://www.alliance-leicester.co.uk/mortgages/index.asp?page=2year-fixedfee&buyertype=unknown&ct=fixedrates

I realise the 999 pounds fee is massive compared to others but it would add up to 38 pounds a month over 26 months. The way I see it is the same over the time period as a ~4.73% mortgage with no fee.

dmg24

I am with Alliance and Leicester with the same product (though didn't pay nearly that high an arrangement fee!). I found them very slow, but if you're willing to chase them up, then you will get things done much more quickly (I exchanged and completed within four weeks!).

Have you checked the valuation cost? This can be high with A&L.

If you open a current account with them (Premier or Premier Direct ... can be opened online), then upon completion you will receive £250 cashback. You can literally open the current account online then apply for the mortgage straightaway and still be eligible. I used this to compensate for the high valuation cost.

I have read several reports about poor customer service from A&L, but I have found them to be great. They are one of few banks where you can ring direct to your local branch, and all their call centres are in the UK!

MortgageMamma

ringo_24601 wrote:

We need a quick exchange, completion isn't a big deal, cheap initial mortgage is very important though. We want fixed rate, interest only, for 2 years. The plan is to put the money that we'd be paying in repayment into doing the house up

This is the A&L scheme we're looking at-
http://www.alliance-leicester.co.uk/mortgages/index.asp?page=2year-fixedfee&buyertype=unknown&ct=fixedrates

I realise the 999 pounds fee is massive compared to others but it would add up to 38 pounds a month over 26 months. The way I see it is the same over the time period as a ~4.73% mortgage with no fee.

If you need to exchange quickly I would recommend abbey or nationwide, halifax good for that also. avoid alliance and leicester they are very slow imo, avoid cheltenham and gloucester, woolwich and royal bank of scotland.