Fixed mortgage ends in December what should I do

dantheman2010

My 2 year fixed term ends in December and I dont know what do for the best.

Basically I fixed the term of the mortgage for 2 years at 6.13% just before the interest rates slashed, lucky me - NOT!

Anyway I am currently paying £530.00 a month (interest only) and I have about 10% equity in the property.

I doubt very much I will get a better deal anywhere else with 90% LTV.

I am with C&G whose current variable rate is 2.5% which will see my mortgage payments go down by over half which is nice, I would anticipate on saving the difference in case it ever increases.

I would automatically default to this variable rate when my mortgage period ends.

I dont really want to move to another mortgage provider as there will be charges to pay them I would imagine which I would have no choice but to add to the mortgage thus decreasing my LTV.

Does anyone have any suggestions or ideas? Or am I just best leaving it to default to the variable rate at the end of the 2 years. I am due to speak with an advisor from C&G soon.

Thanks

[Deleted User]

Don't save the money. Overpay it in to the mortgage.

dantheman2010

Thanks for that suggestion but the reason I would save it is because the interest rates could increase at any time meaning if it ever went above the 6.13% I am paying now I would not be able to afford the extra, so I would have to dip into the "savings" I would have built up from the difference between now and if the interest rates increased. Plus at the moment I am in a 2 bed house that myself and my partner dont intend to have once kids come along, so I just cant see the overpayments being worthwhile as it wouldnt reduce it enough to see a benefit when it came to selling, where as any savings we get could go to a deposit on a bigger house and the remaining equity from the sale also could. My question was just in regards to what my options are to offers i.e. is there any anymore for 90% LTVs or do I just go with the variable rate or am I likely to be offered another fixed term with the same lender etc etc etc. Thanks.

[Deleted User]

I would go with the variable for a year or so. Rates will need to increase a lot to get back to your fixed. That's why I suggested overpyaing now. You'll have time to start saving the money once rates start to move, and then probably still be able to fix at something sub 6% if you're nervous.

You'll also have more equity when you move if you have paid off more of the loan.

dantheman2010

How does a variable work in relation to then changing to a fixed further down the line? I understand with a fixed if you want to move or change it you pay early settlement fees etc for breaking the fixed term, but what ties you into a variable? Or is it nothing then in say one years time I could just ring up and see about fixing it? Also is there fees for switching from interest only to repayment? Thanks

[Deleted User]

Nothing - you jump onto a fix when you want to. You pay fees to get onto the fixed, but not to come off the variable.

Ask your lender about interet to repayment. Not usually a fee.

loubel

Once your fixed rate ends you should be out of the early repayment penalty as well so there should be nothing to tie you to the mortgage and you can repay at any time without penalty. Check your paperwork for the end date of your ERC.

Most lenders will charge an admin fee for switching from interest only to repayment. This should again be in the paperwork they send to you.

If you want to get another fixed rate in the future you will need to remortgage and there are associated costs with this eg. survey/ arrangement/legal fees which you should also take into account when working out whether it's affordable for you.

dantheman2010

Thanks I have spoken to them now, the variable rate is a saving of £300 per month. They can offer a fixed for 2 years saving £100 per month but it would cost £999 (to be added to the mortgage which would decrease my LTV) or 3 years at a saving of nothing per month but has no added costs, but I dont want to be in that house in 3 years time as I would like to have started a family by then and it would be too small. I think I will just go on to the variable rate and save the difference.

JimmyTheWig

dantheman2010 wrote: »

Basically I fixed the term of the mortgage for 2 years at 6.13% just before the interest rates slashed, lucky me - NOT!

Look on the bright side - it was only a 2 year fix. Could have been much worse!

Deleted_User wrote: »

Don't save the money. Overpay it in to the mortgage.

With an interest rate of 2.5% I'd say save the money. You can beat that rate with an ISA.
Or if you or your wife don't pay income tax you can beat it with a standard savings account.

dantheman2010 wrote: »

I just cant see the overpayments being worthwhile as it wouldnt reduce it enough to see a benefit when it came to selling, where as any savings we get could go to a deposit on a bigger house and the remaining equity from the sale also could.

However, this logic is flawed. Ignoring differences in interest rate and access, the deposit on your next house would be the same whether you put the money in savings or overpay the mortgage.
Ask for more details if you don't understand and you want to.


If it were me I'd stick with the 2.5% variable for now at least. Pay off / save as much as you can and you'll be laughing.

dantheman2010

Thank you, yeah I intend to just stay with it at the 2.5% although it wont get set in place for 4 more weeks and wont start until end of December and then I will just save.

opinions4u

Word of warning.

If you move on to another C&G product, you lose the right to return to the 2.5% SVR later on. I think their replacement SVR is 4%.