Should I freeze my mortgage rate?

lewania

I need an advice on freezeing my mortgage. There is no chance for remortage so I need to stay with my current mortgage lender. It has been offered to us to freeze the rate at 5.5% for another 4 years (we had 7.5% for the passed 3 ). The variable there is 4.75%.

Do you think it is a good idea to freeze it at this rate?

beecher2

It looks a good idea to me and will give you the chance to overpay/deal with any debts and hopefully be in a stronger position in 4 years time.

Senior_Paper_Monitor

Three questions .....

1) What are the early redemption penalties ?

2) How confident are you that your circumstances (realtionship, breeding, job/career etc) won't change in 4 years) ?

3) Is new mortgage portable ?



Subject to appropriate answers on the above, seems like a deal worth going for.

lewania

Senior_Paper_Monitor wrote: »

Three questions .....

1) What are the early redemption penalties ?

2) How confident are you that your circumstances (realtionship, breeding, job/career etc) won't change in 4 years) ?

3) Is new mortgage portable ?

Subject to appropriate answers on the above, seems like a deal worth going for.

answering your questions
1) it is 4%, but I do not suspect we will pay it in full in the next 4 years
2) nothing will change relationship and breeding wise. As to the job - I do not know. Hopefully only for better.
3) I do not think it is, but I am no expert.

I am drawn to the idea of having stressless next 4 years and not worrying about increasing interest rates.

Senior_Paper_Monitor

In the circumstances you describe I'd certainly be tempted

RenovationMan

Why is there no chance of remortgaging elsewhere? What's the problem?

lewania

RenovationMan wrote: »

Why is there no chance of remortgaging elsewhere? What's the problem?

The mortgage we have originally taken was for more than 100% (95% mortgage and the rest is unsecured loan). We have only been paying that 3 years and in the current credit/economical climate, there is no chance for remortgage.

RenovationMan

If the loan is really unsecured, then it's nothing to do with your mortgage, so you had 95% LTV when you started 3 years ago. Depending on how much you have repayed and how much your house dropped in the housing market correction, you may still be on 95% LTV.

Is there any way you could make overpayments and reduce your LTV to 90%? It will open the way for some much better mortgage deals.

Senior_Paper_Monitor

..... and (since this is I suspect the Northern Rock 'together' product) a 95% mortage in the current market will be punitive and the rate on the unsecured bit will go up to around 8% if separated from the mortgage the OP's opinion that "There is no chance for remortage (sic)" seems totally valid.

As long as he/she/they is/are confident (as he/she/they has/have indicated) that the relationship/kids thing is unlikley to disrupt his/her/their life in the coming 4 years and any job change woyld be for the better it still sounds like a good deal to me.

Bath1865

Consensus is a rise in interest rates is expected from their historical low levels. If they did and the SVR matched this, it wouldn't take long for the fixed product to be 'in profit'. You also benefit from knowing what the payments will be for the next 4 years.

It is also not a bad fixed rate for 95% LTV. On that basis it is a no brainer.

On the minus, I agree with the comments re the product could be costly if you need to exit in the 4 years.

RenovationMan

OP, if your loan rates are punitive if you split the loan from a mortgage, then could you get a loan with someone else and repay the northern rock loan (if that's what you have)?

Also, will the fixed amount also cover the loan? If you fix, can you overpay either the loan or the mortgage? If not, then I'd chance it and repay them ASAP while BoE rates are low.