Coming off a fixed rate....

Steerpike_2

Hi,

I bought my first place about 3 years ago - and in Feb, I'm coming off my fixed rate (5.99%).

I really need to get my monthly repayment down as I have very little disposable income. I've coped over the last few years, now is the time I need a little slack.

So, I'm a bit ignorant but...I need to investigate my options for getting the monthly repayment down. How likely are my current lender (Santander) to simply offer me a standard flexible mortgage? Given I don't have much slack, how risky is it that interest rates will rise fast, past the rate I know I can afford (i.e. 6%)?, Finally, maybe an interest only mortgage is the way to go for a few years until i've cleared debts and start earning more.

Any thoughts appreciated.

Cheers

Johnjohn

If you don't do anything you'll probably be moved to the standard variable rate. I think the Santander Standard Variable Rate is 4.24% at the moment which is high compared with most other lenders. The good news is it's much less than the 5.99% you have been getting charged under the fixed rate.

I have no idea where interest rates are going over the next few years. However it seems unlikely that they are going to change much over the next few months - The Bank of England rate is so low it can't really go down and there is enough uncertaintly about the economy that it seems unlikely that they will vote to increase rates over the next few months. Therefore there is probably no rush so you can shop around and see what deals are around.

Johnjohn

Sorry, forgot to mention that there's some excellent advice here - http://www.moneysavingexpert.com/mortgages/

_Andy_

Steerpike wrote: »

Hi,

I bought my first place about 3 years ago - and in Feb, I'm coming off my fixed rate (5.99%).

I really need to get my monthly repayment down as I have very little disposable income. I've coped over the last few years, now is the time I need a little slack.

So, I'm a bit ignorant but...I need to investigate my options for getting the monthly repayment down. How likely are my current lender (Santander) to simply offer me a standard flexible mortgage? Given I don't have much slack, how risky is it that interest rates will rise fast, past the rate I know I can afford (i.e. 6%)?, Finally, maybe an interest only mortgage is the way to go for a few years until i've cleared debts and start earning more.

Any thoughts appreciated.

Cheers

Your mortgage will revert to the standard variable rate.

Interest only will be at the discretion of your mortgage lender (and I believe they will decline it unless you have at least 50% equity).

Steerpike_2

thanks both for your advice - very much appreciated.

Re: interest only, I understand they may decline, so I'll have to shop around and look at any 'get out' penalties if I decide to go down that route.

Gorgeous_George

Your mortgage MIGHT revert to the standard variable rate. It might not.

It will revert to the rate that you agreed when you signed up for the mortgage. This could be SVR and could be a tracker linked to the BofE base rate. Or something else.

Will rates rise quickly? I doubt it but my crystal ball needs new batteries. If they rise, I doubt that they would rise above 5% within the next 5 years - probably the next ten. If they did, there would be many thousands of people in a worse position than yourself.

But it is a game of poker. You could jump onto a safe rate - and fixed rates are extremely good value at present. But that safe rate may be higher than your SVR or whatever you revert to. You decide how much the safety of a fixed rate is worth or how much you can afford to gamble on how the economy will influence interest rates.

GG

_Andy_

Steerpike wrote: »

thanks both for your advice - very much appreciated.

Re: interest only, I understand they may decline, so I'll have to shop around and look at any 'get out' penalties if I decide to go down that route.

What is your LTV?