Mortgage Advice please

Mabelj

Hi

I'm new to the forum and would really appreciate some advice. We are currently on a lifetime tracker with First Direct at 0.79 above base rate. With increasing talk of interest rates I'm trying to work out how high they would have to go (and how quickly) to make us better off switching to a fixed rate - I can't see the point of switching to less than five years.

TrickyDicky101

To usefully answer that you need to give:

1. Amount outstanding
2. Term oustanding (ie how many years left on the mortgage)
3. Whether you have any ERCs to pay if you remortgage

A general point though: the rate you have is excellent (I'm on 2% above BoE base, and I thought that was good!). I wouldn't remortgage in a hurry.

firstaspect

If I was in your position I'd be trying to make as many overpayments as I could afford/was allowed to bring the mortgage down before any potential rate increases.

Mabelj

£220K outstanding, 18 years left, nothing to pay if we move.

My instinct is to stick with it but I may be living in fools paradise hoping rates won't rise too much.

Have been overpaying £100 a month for last 2 years which helps - have around 50% equity.

HappyMJ

And if I were in your position I'd be making the minimum payment required and investing the excess in savings accounts that will pay an interest higher than 0.5%+0.79% plus tax. It's easy to find a gross rate above 1.6%.

HappyMJ

If you have a child or know of one whose ID you can use then open a halifax childrens savings account and earn 6% interest with a regular £100 per month contribution.

TrickyDicky101

Well, I make it your current repayment amounts must be around £1150 per month, although if you are overpaying by £100pm then in total approx £1250pm? Even an increase of 2% in the BoE base rate would only see your repayments jump to approx £1350pm which, assuming you didn't continue to overpay, would represent a real monthly increase of £100. That isn't much. Fixed rates are dependent on long term swap rates (or longer term than the overnight BoE rate) so it doesn't necessarily follow that lower BoE rates means equivalently lower fixed rates for mortgages. I would probably stick with your tracker and only consider fixing at some point in the future if the BoE rate increases sharply.

blueberrypie

HappyMJ wrote: »

If you have a child or know of one whose ID you can use then open a halifax childrens savings account and earn 6% interest with a regular £100 per month contribution.

The OP would be better to start a Regular Saver with First Direct, where they can save up to £300/month and earn 8% on it (and as their mortgage is already with FD, it's probable they already have a First Account).

As you've said, saving at a higher interest rate is a better route than overpaying right now. It does require the discipline to leave the saved funds alone, of course, which not everyone has, and in that case it might be better to put them into the mortgage. The other consideration with a Regular Saver is whether it's likely that mortgage rates will increase substantially before the Regular Saver matures in a year's time.

Thrugelmir

Think carefully before leaving a lifetime rate. As you'll never get this low rate ever again. Once you've left the "new product" you'll more than likely be on an SVR of 2% plus above base.

If you think that you may struggle in the future if rates were to rise steeply. Then downsizing to a more manageable level of debt should be a consideration now. Rising interest rates will merely add more downward pressure on house prices.

Mabelj

That's my feeling - thanks very much good to have another opinion (and very spot on with the figures). Will rethink if there are steep rises.