Confused!

Nara

Hi,

My 5 year fixed rate ends 31st decemeber, Nationwide have sent me a letter to say i have to either take up a new deal or do nothing and it will revert to a variable rate.

Underneath is says mortgage products reserved before April 2009 will revert to the BMR which looking at their site is 2.50% and guaranteed not to be over 2% of the bank of Englands current rate.

Useing the calculator on their site it would save us £200 a month on our mortgage! but i feel like there must be a catch and ofc I'm worried if the rates suddenly shot up really high i would be in big trouble! it also says you can switch at any point on this deal over to a fixed rate but you could never go back to the BMR afterwards, so i guess its take a risk kind of mortgage, even tho i guess rates are so low it can only go up right? (silly me thinking 5 years ago that rates would never get much lower haha)

The fixed deals for 2 years is 4.19% which would save me about £100 a month and the security of a set amount ofc, they do a slighty lower rate but that involves a £995 product fee and will save me £30 a month extra :mad: When i type in our details the site doesn't offer me any other mortgages then the fixed ones or the revert to BMR.

I can;t decide what to do !

Ps : forgot to say my partner has only been in his new job 1 month, so i'm pretty sure we on't be able to swap providers as we won't have enough payslip evidence to show them??

Radionotme

Lucky you - I'm waiting another 2 years before I get a similar letter from them!

Regarding a 'catch', not really. Nationwide were similar to you in not really expecting rates to go this low, and so BoE rate + 2% sounded reasonable for them. With rates plunging, they've introduced a new 'SVR' that's higher, but they can't retrospectively apply this to people who already have mortgages, only new customers, or existing customers who take out a new deal.

So in effect you've now got a lifetime tracker that's 2% max above BoE, but of course you take the chance that rates might rise.

Personally, if I was going to fix, I wouldn't fix for only 2 years - although having said that I probably wouldn't fix at all, but rather stay on the BMR and overpay the difference to make a reserve for when rates do inevitably start to rise.

Basically, there's a reason that they've replaced the BMR with the SVR, and that's that they've realised that the BMR is actually a really good deal!

Nara

Thanks, I was thinking the same thing but when i told a friend of mine she freaked out saying 'well what happens if the rates rise to like 13%!!' thats how high the rates were when her mum bought her house so she said and her cousin is a mortgage broker so she didn't think it was a good idea!! So thats when i started to question myself and thinking what if things suddenly did shoot up really high then i would be stuck, and by that point no chance of getting a good deal on a fixed rate.

I know its risky, our 5 year fixed mortgage is currently 4.94% so i know i could afford to pay at least this high when rates go up.

So if we say overpay the extra £200 we would be saving, this would help by lowering the mortgage? so if the rates shot up it wouldnt be so high? We still have about £120000 left to pay, so LTV rate about 70% according to what our house is worth now. I swear its taken me months to try and get my head round all this, but my partner is like an ostrich with his head stuck in the sand not worrying about money things, so I have decided to take things into hand, although it gives me a headache most the time trying to get my head round it all lol!

Thrugelmir

There's no catch. Other than the fact that you are unlikely to obtain this rate with the NW ever again.

Rates eventually will rise again. When no one knows. So if you can comfortably afford the monthly repayment you are currently on.
Personally I would suggest maintaining the repayments as they are and paying down your mortgage quicker.

Even if rates were one day to rise to 13%. Then you'd owe less and correspondingly the interest charged would be less. The capital balance owed is as important as the the interest rate charged.

Nara

Thanks,

I think i will do that then, revert to the BMR but overpay as much as i can and hope to hell the rates don't go too high in the near future!
I can afford what we are paying at the moment so it sounds like a good plan to do this, will just have to keep an eye on the rates! Just wanted to know that I'm not making a reckless decision :-)

Thrugelmir

To be on a life time rate of 2% above base is extremely good.

The low sub 2% tracker mortgages will never again see the light of day.

Little point in worrying about where interest rates might go. Your mortgage balance is something you do have control over.

firstaspect

I'd keep paying what you are at the moment (so you will be overpaying) and then if the rate does have it's first rise then think about getting onto a fixed rate deal (although I'm guessing the rates they are offered at will go up as the BoE rate goes up).