long Term Fixed rate (a good idea?)

kerryb_4

Hello
My current fixed rate mortgage (with the Nationwide) is due to end in the next few weeks and I have been looking around for the next deal.

I have discovered Northern Rock are advertising a 15 years fixed rate at 4.99% (though they have pretty enormous setting up fees).

Surety of payments is an important factor to me, but I am scared by the whole commitment issue of such a long term deal (and also the fear that the interest rates might crash leaving me feeling like a bear with a sore head!).

I am just wondering if this offer is too good to be true or whether I should be steering clear of such deals

I hope someone can help
Thanks
Kerryb

rizla01

Wow. 15 years is a L O N G time isn't it.

One of those situations where you could be sitting pretty in ten years time when everyone else is paying 12% or more (Back to the 80s). on the other hand Sick & parrot come to mind if everyone else is paying 2%!!

I don't think that 4.99% is a bad deal and I assume that it will transfer, should you want to move. You don't say what the penalty would be should you want to end it. What happens if you lose your job and cannot manage it? Are you covered in any way.

I think that I would be tempted to go for this if the mortgage payments are easily affordable but if you are stretching yourself to the limit, think carefully.

If it's a good move you could be kicking yourself if you don't do it. Bit like those that didn't take out a mortgage when I did (1978) who are now still paying rents of £3-400.00 PM when I have two yrs to go on my mortgage and it is now £128.00 PM.

Suggest you speak to a couple of finacial advisors first, though.

Rizla01

bunking_off

My brother's just going through the process of setting up one of these. I'd say that for someone who wants stability and isn't in to actively managing their mortgage (e.g. changing provider every couple of years), it does seem like a good deal.

On the upside, if rates go up to 10%, you're sitting pretty. The downside doesn't look to be too bad to me. Even if, say, base rates were to fall to 2%, mortgage rates would probably be sat at approx 1% above that, meaning 3%. So, you'd be paying over the odds, but nothing like what's happened in the past (I remember having to pay a penalty to get out of 8.99% fix when rates had fallen to 4.5%!). And I'd imagine that a base rate at that level would be an exception that didn't last for long...

Set against this, I haven't looked at the small print around transferability, and making extra repayments. I seem to recall that the overall repayment penalty was very high, but so long as you're confident that you're not going to win the lottery, that may not be an issue.

panther

As Martin says in his excellent "Guide to Remortgaging" booklet - Don't look back in anger.

Aletank

How much are the fees to change over to this Northern Rock deal from Nationwide ?
I take it you would have Arrangement Fee, Valuation Fee, anything else ?
To remortgage on another Nationwide special rate would cost £390 for a max of 5 years.

kerryb_4

Thanks to all of you who have replied, I really appreciate the advice. However, I have just thought of another issue regarding long term fixed rate vs shorter term fixed rate....

If I was paying 4.5% for 2 years on - lets just say - £80,000, then in two years time I would be paying whatever the interest rate is on what is left of my capital which may be £75,000.
Is this a better deal?
Because whether the interest rate has fallen or risen, the interest will be on the lower capital amount.
Whereas, if I take out the 15 year 4.99% the interest is calculated on the full £80,000 for the whole period.

Does this make sense?

bridiej

It depends on the mortgage, ours is with Nationwide and they calculate the interest daily, so if you paid off, say, £1,000 off your £80,000 mortgage one day, the next day your interest would be calculated on £79,000.

jen_jen_2

I can only find Northern rock 15 yrs at 5.19 however britannia are offering 4.99 for 10 years and cheaper fees than N rock.

any other good long term fixed rates out there??

MarkyMarkD

kerryb wrote:

Thanks to all of you who have replied, I really appreciate the advice. However, I have just thought of another issue regarding long term fixed rate vs shorter term fixed rate....

If I was paying 4.5% for 2 years on - lets just say - £80,000, then in two years time I would be paying whatever the interest rate is on what is left of my capital which may be £75,000.
Is this a better deal?
Because whether the interest rate has fallen or risen, the interest will be on the lower capital amount.
Whereas, if I take out the 15 year 4.99% the interest is calculated on the full £80,000 for the whole period.

Does this make sense?

No, it doesn't. You won't pay interest on the full £80,000 at all. You'll pay it on the annual (or monthly or daily, depending on the lender and the product) opening capital balance, unless you intentionally take it out as interest only in which case your capital balance wouldn't fall.