Question about the following SVR on a two year fixed rate - my brain hurts!

gracie1

Hi all

I have been offered (after full application) a two year fixed rate 90% LTV mortgage with Saffron BS. Fixed rate is 5.89% and then SVR (Currently 5.39%).

I now see that Britannia have a new two year fixed rate 90% LTV at 5.49% then onto SVR (currently 4.24%).

In an ideal world I would move my mortgage elsewhere after the two years and get another fixed rate. However having read this forum lots and heeded the warnings I'd like to try and protect myself as best I can in case I can't remortgage at this time (drop in value of the house/ no more 90% LTV deals out there then). I plan to overpay as much as I can to avoid this but who knows whether that will protect me enough.

My question is about the two SVR mentioned above. Do the current SVRs necessarily bear any resemblace to the SVRs of 2012 when my fix ends (I know there are no crystal balls but I'm hoping a more experienced brain may contain a more educated guess than mine does).

FYI it will cost be overall an extra £1200 to go with the Britannia mortgage if I were accepted (fees etc).

Any help VERY gratefully received!
Thanks in anticipation

Cannon_Fodder

In theory, you would hope the Britannia SVR would stay the same gap, 1.15%, cheaper than Saffron.

Whether you would stay with Britannia, after the fixed period, long enough to make up for the £1200 extra costs, only you know.

The period required to recoup those costs would vary according to the size of mortgage. i.e. per £100k, a year on SVR would save you £1150 at Britannia.

But if your tendancy is to fix every two years, would you ever use that SVR ?

It is also possible, however, for Lenders to apply different interpretations of 'Variable', as well acting at different speeds to reflect changes to the Base Rate, so the gap might be the same, bigger or smaller, at different times.

Personally, two years is danger territory in my mind - the recession will hopefully be history, even if actions to deal with the deficit cause a double-dip, so rates will have to be, or will already have been, increased around that time. If you can find a 3yr or 5 yr fix that's not too much more, I'd go for that.

gracie1

Thank you Cannon Fodder, very grateful for your advice.

You're right I hope I never need to rely on anybody's SVR but if prices fall...

In relation to whether I would make up the £1200 on the SVR - good point but i've just worked out that over the 27 installments I'd be £1080 better off (on payments) with Britannia simply from the better fixed rate. For interest house price is £164,250.

I absolutely take your point about the danger of the two year fix but for personal reasons I've decided I don't want to be tied into anything for more than two years.

So we think/hope that SVRs keep roughly the same difference between them over time then....