First-time buyer - mortgage advice

Ange40_2

Hi,

My partner and I are about to buy for the first time in North London. We have offered 305,000 and have a 15% deposit - therefore are looking at a 85% LTV mortgage over 30 years. The more brokers I talk to and the more I try and look at all the figures, coupled with uncertainty in the economy in general, the more indecisive and confused I get. Any input from anybody, therefore, would be much appreciated with respect to helping clarify our current thinking.

The best tracker rates seem to be direct from Co-Operative Bank, and the main decision there seems to be whether to go for a regular tracker or capped tracker:

3 year tracker at 3.19% (£1129 pcm)
5 year capped tracker starting at 3.49% (£1173 pcm) and capped at 6.49% (£1652 pcm)

Both trackers have fees of £999.

The best fixed rates I have found are a 2 year direct from Co-Op and a 4 year fixed from a broker:

2 year fixed with Co-Op at 4.49% (£1324 pcm) with a £999 fee

4 year fixed with Abbey (via broker) at 4.99 (£1403 pcm). I have been told that this option has no fee, free survey and £250 cash back.

Again, any thoughts would be much appreciated. Given that we would be looking at about an extra £240 a month on top of basic mortgage for the service charge and council tax, the temptation is to take the cheapest option, but at other times, I think the 4 year fixed will at least provide some certainty in an uncertain climate. Our combined take home pay is approx £4,800 pcm.

Many thanks.

southeastsuburbs

Hi, I can't give any advice I'm afraid but my boyfriend and I are trying to make the same decision. The co-op are by far offering the best deals at the moment, and the question is whether to go tracker, capped and fixed. My personal opinion is that we should take advantage of the low interest rate whilst it is low. Sure, it's riskier... but at least with the capped you know that if the interest rate rockets you have some kind of safety net. So I think we've decided to go with the capped. But we're FTB's ourself so that's just our personal choice!

Scared we're not going to get it though. Our offer has already been accepted- the pressure is on!

Good luck with your decision.

Procrastinator333

Hello,

This really is in to purely speculation as any opinion is really based on guesswork. So my opinion below, but no crystal ball:

1) First off, I would suggest look at a 25 year term instead of 30, I don't think it will make much of a difference to the cost, and while 25 / 30 don't feel different now, they will do in the future. Also, work out the interest on 25 years vs 30. Scary.

2 yr tracker: Guessing you can get out of this without a penalty, but it is the riskiest of the lot. Personally I wouldn't gambe with my home, so no matter how unlikely it seems, unless you can afford rates of 15%, I wouldn't touch it. In most cases I'm risk happy, but to me, the downside is just too big.

Capped tracker - Are there exit penalties on this? It only takes a % or 2 rise, which over the next couple of years seems likely and to me and it is expensive, if it costs money to get out I would be wary. It seems likely that by the end you will be on the highest rate. Personally I think if you do't want the risk, just take the fixed.

2 year fix - I don't see the point, worst of both worlds. You pay a higher rate in the short term, the period over which rates probably won't rise too much. Then you are out of your fix when they may go up. Great.

4 year fix - I have talked myself in to this haven't I! But to me, at the start of your mortgage, when you are so highly leverages, I just wouldn't want the risk. I would take the fix. I would also look around for a 5 or 10 year fix. If I could find a 10 year fix at around 5.5% I would take it.

This is just me and my risk aversion to this particular risk (losing your home), Having said all this, maybe we enter a Japan like stagnation and rates stay at 0.5% for 10 years. In which case I would have wasted a mountain of cash.

Swings and roundabouts! Hope it all works out....

cheekymonkeb0y

shame these need a 15% deposit