advice please- mortgage and redundancy

upsydaisy09

Hi All

I'm new to this site though I used to lurk years ago while paying off credit cards etc.

I found out today I am being made redundant. I have got over the initial shock- had spinal surgery last week so fuinding out while off sick made it seem worse, plus we have an active 1 year old.

Basically, I'm trying to get myself feeling positive and sorted, as at the moment I feel scared, numb and very unsecure.

Mortgage started in 2005, 5 yr fixed rate 4.99% over 35 yrs with Alliance & Liecster. (Original payments on the fixed were £540 per month) Property was £110.00, got a mortgage for £105,500. House prob worth £140,000 at a push.

Fixed rate has ended so now on a rate which is 1.25% over the bank of england base rate as thats what my original contract said, still with A&L no fee.

Basically paying £338 per month on a remaining £103,000 (ish)mortgage which is now 30yrs.

I dont know anything about mortgages, was niave when we first got it so I would appreciate it if anyone could answer the following:

- would you advise me to get a fixed rate (for security)
- can interest rates go up dramatically from one month to the next?
- i keep being told that when Thatcher was in government rates shot up to 15%, now whether this is true or not it scares the &£$! out of me as obviously we'd be homeless! Could this happen with no warning? How much warning would we get- 1 week / month / year / more?

Aiming to get a job doing anything and saving ideally £300 a month for security as currently no savings whatsoever. Got no debt at all apart from mortgage and a student loan.

Sorry to be frantic but as long as we can get new jobs to cover the basic bills and mortgage I will be happy. Any help appreciated...

Wasnt sure if i should post on redundancy forum so pls let me know if its more for that.

Thanks!

jamesperrett

Mortgages are unlikely to rise dramatically from month to month unless something really crazy happens to the economy. The 15% rate was a short lived blip in response to an exchange rate crisis if I remember correctly although at that time rates were up above 10%. If you look at historical records, rates of around 5-6% have been the norm for the last 100 years with the occasional few years above or below that. It is unlikely that rates will rise quickly from their current levels although a gradual rise is expected over the next few years.

I think you would be sensible to stick with your current mortgage, save what you can in an account paying decent interest and then use those savings to over pay your mortgage when your mortgage rate rises to more than your savings rate.

James.

[Deleted User]

Ok. Rate increases.

They will go up - at some point. Proboably not too soon.
They will likely go up 0,25% or 0.5% a month. Not necessarily every months.
Yes - they were at 15% in the 80's.
But they don't shoot up from 2% to 15%.
Will they go to 15% again? Not anytime soon. And hopefully not at all. But no one knows.

Should you fix? If you are nervous and you can afford to fix, then probably yes. But you need to know if you can afford that fixed rate going forward if a new job is hard to come by. You may be better off sticking with the tracker, saving the rest in case you need it for when rates start to rise.

While you don't have an income, you won't be able to move providers, so you are limited as to what A&L will offer.

Good luck.

upsydaisy09

Thankyou for your replies. They are very helpful and I feel much better with this knowledge.

Many Thanks, Shelley

xyellowx

op as stated above i would stay on the svr and save the balance (make sure you do save it) cant see it going up for a good while but thats only my opinion my brother took a 5 year deal out 14 months ago i told him he was mad he regrets it now and wishes he had stayed on the svr
best of luck

dimbo61

You are on a very good deal with A&L ( more luck than judgement ?)at 1.75% and you wont get a fix at anywhere near that so when you get your redundancy money put it into cash ISa,s paying more than 2% until you get another job.
Keep this money as emergency funds in case its takes some time to get a new job and good luck