Need help with parents mortgage with Bham Midshires

**woody123**

Hi,

My parents have a mortgage with Birmingham Midshires. They have today received a letter stating that their interest rate is changing to 2.34% above the bank of england rate - currently 0.5%.

Some details of the mortgage are below.

Amount owed: £24,858.41
Mortgage type: repayment
current monthly payment: £258.80 (new rate from October)
years outstanding: 9
Aprrox house value £180k

They have asked me to look on the internet for some better deals and i can't find any!! Could you advise me of the options available to them please? At the moment i can't see why they can't stop with the midshires. Am i right?

Thanks for reading
Mark.

CapJ

This is quite a good deal and in the short term no doubt they are better off with BM.

BUT they have less security once interest rates start going up since it is a variable rate. However it is impossible to predict when interest rates will go up; it could be a long time away.

So if they want security for the next few years get a 3 (or even 5) year fix.

On the other hand if they are prepared to take a bit of a chance stick with BM, it is unlikely they would lose out in the next year or two.

Thrugelmir

The balance on your parents is fairly small. So the first matter to consider is the impact of a change in interest rates. On a rough basis as it stands together every 1% rise in BOE base rate would increase the mortgage by around £20 (£240).

This is a worst way scenario as in fact the capital balance owing is falling every month.

Many mortgage products carry very high product fees circa a £1,000. This is how lenders discourage the transfer of small mortgage balances which will never make them much profit. In your parents case paying such fees makes little sense. As it would take years to recoup this cost.

So to give your parents piece of mind. I would suggest that they make overpayments on their current mortgage. This has two benefits.

1. If interest rates remain the same, the balance is cleared quicker.
2. If interest rates subsequently rise they have a cushion built up and can absorb the increased cost.

**woody123**

Thank you both very much for your replies.

Thrugelmir, my dad wants to overpay on the mortgage just once he has settled outstanding finance on his car so to stick with the variable rate at the Birmingham Midshires does seem a good option..

Thanks again
Mark