What am I missing?

sirhobo

Hi all, my girlfriend and I are first-time buyers, just seen a property we love. I've seen an IFA and have been approved for a mortgage (LTV 80%), but yesterday came across this HSBC lifetime tracker:
https://mortgages.hsbc.co.uk/product/140-life-time-tracker-standard

It seems a bit too good to be true for a LTV 80% (max I can afford). Am I missing something? This tracker rate beats the variable rate offer my IFA provided (3.04 + base for 2 years), allows unlimited lump sum and overpayments without charge, and has no early repayment charge or exit fee

Am I right in thinking that, in the event that interest rates rise beyond my means I would not have lost any money if, by that point, I had saved at least the same amount as the cost of initial mortgage fees? HSBC charges £399 arrangement fee plus £285 for basic valuation.

This seems like a good deal for those that are happy to accept more risk than a fixed-rate deal, no?

Sorry if these are stupid questions, just trying to avoid doing something even more stupid! thanks in advance!

GMS

HSBC do not allow brokers to place business with them which is why your adviser didnt/couldnt recommend them.

HSBC are very very strict with who they lend to andhave been known to decline for the slghtest reason.

As a first time buyer have you considered the risks of a tracker? You have never owned a property before therefore have never dealt with the day to day runing and expenses involved. It is fine saying the rates are low now and feel you can swallow a rise of x%.

Keep in mind if rates rise to a level you say beyond your means, any fixed rate available at that time will also be beyond your means as you say.

Fixed rates are historically low at present but as rates rise so will the fixes.

Dont assume you can bail out of the tracker on to a better fix, unlikely to happen.

If you are happy with the risk then go for it.

Make sure you check the ins and outs of the HSBC criteria. Especially check affordability.

Good Luck

bilbo51

Have you tried the calculators on HSBC's website to see if they might consider your application?

https://mortgages.hsbc.co.uk/how-much-can-I-borrow/

dunstonh

HSBC do not allow brokers to place business with them which is why your adviser didnt/couldnt recommend them.

If they employed the IFA under the independent classification they could. (i.e fee based and include all deals). If they employed the IFA on whole of market classification then that typically means commission only deals. I know you know that but IFAs are required to offer the independent option. Although, some are still very wary of offering a fee option vs no fees and commission.

sirhobo

Thank you GMS, you make some very useful points. When you say that is unlikely that I could bail out of the tracker on to a better fix, do you mean because I might not find better fixed rate deals or are there reasons a lender would not give me a fixed rate because I've left another mortgage early? thanks again for the advice, it's much appreciated

GMS wrote: »

HSBC do not allow brokers to place business with them which is why your adviser didnt/couldnt recommend them.

HSBC are very very strict with who they lend to andhave been known to decline for the slghtest reason.

As a first time buyer have you considered the risks of a tracker? You have never owned a property before therefore have never dealt with the day to day runing and expenses involved. It is fine saying the rates are low now and feel you can swallow a rise of x%.

Keep in mind if rates rise to a level you say beyond your means, any fixed rate available at that time will also be beyond your means as you say.

Fixed rates are historically low at present but as rates rise so will the fixes.

Dont assume you can bail out of the tracker on to a better fix, unlikely to happen.

If you are happy with the risk then go for it.

Make sure you check the ins and outs of the HSBC criteria. Especially check affordability.

Good Luck

GMS

You are free to leave any mortgage deal at any time but fees and charges may apply.

Should you get the HSBC deal there would be no issue with you leaving for another lender at any time. The point I made was that as the tracker rates rise in line with Bank Base rate then the fixed rates will do the same.

So if a 3.5% fixed is available today and rates rise, the 3.5% fix should do accordingly.

For that reason a better fixed rate is unlikely to be available when you decide the tracker has reached too high a rate.

sirhobo

Right, I understand. Our hope is that we'll move out of London in 3 years and buy a lower priced (but larger!) property and have more equity, hence be able to access better rates. But to be honest, we're still edging towards a fixed rate.

thanks for all the help

GMS wrote: »

You are free to leave any mortgage deal at any time but fees and charges may apply.

Should you get the HSBC deal there would be no issue with you leaving for another lender at any time. The point I made was that as the tracker rates rise in line with Bank Base rate then the fixed rates will do the same.

So if a 3.5% fixed is available today and rates rise, the 3.5% fix should do accordingly.

For that reason a better fixed rate is unlikely to be available when you decide the tracker has reached too high a rate.

isplumm

sirhobo wrote: »

Right, I understand. Our hope is that we'll move out of London in 3 years and buy a lower priced (but larger!) property and have more equity, hence be able to access better rates. But to be honest, we're still edging towards a fixed rate.

thanks for all the help

Hi,

When we bought our 1st house - we went for a fixed rate - cause you then know what to pay every month - easier to budget.

Mark

getmore4less

sirhobo wrote: »

Right, I understand. Our hope is that we'll move out of London in 3 years and buy a lower priced (but larger!) property and have more equity, hence be able to access better rates. But to be honest, we're still edging towards a fixed rate.

thanks for all the help

How does this purchase compare against renting for a further 3 years and saving, remember the costs of ownership are higher than renting

3 years is not very long in what may be a flat market

You also need the costs of moving to be covered by house price inflation during that period.