interest rates and new mortgage pls help

frank_drebbin

Hi,
I've just sold my house and am looking at a new mortgage.
It will be about 55% LTV and I need £170,000.

I am looking at a 2 year tracker with Santander at BBR + 2.49% then SVR.

Clearly I will want to change my mortgage after 2 years to exploit new introductory deals, but can someone please tell me, when the base rate inevitably goes up, what is likely to happen to introductory mortgage deals?

Are they likely to go down to compensate for this? Or are they likely to stay the same (I know that when BBR was higher some deals were below base rate to compensate).

Also, I have read on here that people suggest avoiding interest only mortgages unless part of a broader financial plan, however aren't most tracker mortgages interest only in that you only have to pay the interest, and balance payments over this are flexible and up to the individual? I never see reference to capital repayments in reference to these mortgages. Can someone explain?

Thank you very much in advance.

getmore4less

Santander SVR of 4.2 is relatively high.

If you are happy with a variable rate why not look at a lifetime tracker? or one with a better followon rate.

Reduces the need to remortgage if the follow on rate is good

They also seem to have better deals than base+2.49% which might be better for your size of loan.

Most if not all trackers are by default repayment schedule for the minimum payment.

hillcats

I have a tracker mortgage which is CAPITAL & INTEREST being repaid.
It is clearly better to have a repayment mortgage nowadays rather than a interest only as it seems that the repayment vehicles (ISA, Endowment) just can not be fully relied upon to meet the mortgage at the end of term.

By having Interest only with no repayment vehicle you are just renting the property and you will in effect never own it, at least with repayment you are chipping away slowly at the debt and you will eventually own the property.

hillcats

With regards to Interest rates, nobody really knows what will happen in the short, medium or long term.
Personally, I am expecting them to raise above and beyond the level they were before around 7% when I took out my existing mortgage, so because of this thinking I am still paying my mortgage at this rate of 7% plus more in over payments, then when the rates do start to rise it will be a while before they catch up with me. I am used to paying at this rate so it made sense to keep the payments at this level.

One last thought: the country needs to pay for this mess we are currently in, I do think interest rates will rise and I am personally expecting to see them hit around the 12% mark within the next few years which I can afford with a little bit of belt tightening, keep your head out of the sand and EXPECT rates to rise then you will not be taken by surprise when they do. Always expect the unexpected....

ray123

'I am looking at a 2 year tracker with Santander at BBR + 2.49% then SVR.' - a poor deal in my opinion.
This mortgage has an Early Repayment Charge of 2%.

First Direct are offering a Life Tracker, 65% LTV - Base Rate +1.89%. There is NO early repayment charge for this mortgage, enabling you to transfer to a fixed rate mortgage if the base rate increases significantly.
http://www2.firstdirect.com/1/2/mortgages/repayment-mortgage-rates/variable-rates;jsessionid=0000WDcrtBJFHv7N_O1a32xkzej:11jk49v2v

Another alternative is HSBC, who offer a a Life Tracker Special, 70% LTV, Base Rate +1.99%. Again, there is NO early repayment charge for this product.
http://mortgages.hsbc.co.uk/product/Life_Time_Tracker_Special_(spsrfheltt124)

frank_drebbin

OOps, really sorry to those who replied, the rate was BBR +1.99, to make 2.49 total, not BBR+2.49.

Thank you for the product suggestions. I did want the First direct lifetime tracker, but unfortunately they only do 3.5x salary and I need 4.59x, and HSBC will only give me 3.35x (this seems very low considering I have a 45% deposit). My wife has only just started her job and has a 6 month probation and they won't budge on this, so unfortunately I can't get the First Direct mortgage.

I have not really seen many other lifetime trackers other than HSBC (same requirements as First Direct I believe) or else they have poor rates or huge arrangement fees.

About the interest only/repayment thing, I meant that am planning on paying back about £1000 a month on the mortgage above the interest, but I don't see (or understand if they exist) trackers with a mandatory repayment requirement, they seem to only show interest and the repayments are up to the individual. Am I wrong on this?

Thanks for the replies, and does anyone know of any other products I should look at?

Thrugelmir

Although you have a low LTV. Borrowing at over 4.5 times joint salary will restrict your options. So its your choice of either a good rate for life (FD) with a smaller mortgage, or gamble on future rates with a larger mortgage now. You can't have it both ways.

Majority of lenders now require evidence that a suitable repayment vehicle is in place. So choosing a repayment mortgage is ideal for most people as it maintains financial disclipline of regular payments. Money can soon be frittered away and finding a lump sum in a short period can be very difficult particularly as financial circumstances suddenly change.

thewinkshow

there is quite alot of choice out there, the ultimate decision falls to you, your finances, circumstances, attitude to risk, and future plans and needs

but bear in mind, Interest Rates will go up, its not a question of if, but when
it will not go any lower than 0.5% so the only way is up = PLAN ACCORDINGLY
so you dont get caught out and can easily manage in the worst case scernio, so if the interest rates dont rise quite as fast or as much as feared you financially better off and can overpay