SVR or fixed again?

dantheman2010

Hi all

I had my mortgaged fixed for 2 years in December 08, yep just before the interest rate crash.

So I had the pleasure of spending the last 2 years paying 6.13%, this has now (or is just about to end next week) and I revert to the SVR which is BofE + 2%, so only 2.5% which sees a saving of about £300 a month for me.

My only other option is to fix for 3 years a 4.99%, as the 2 year fixed comes with a £1000 fee which I am not adding to the value of the mortgage as my equity value isnt much as it is.

Now do I take the punt and try and enjoy some months of saving such a huge chunk or do I fix and save such a small amount a month, but be safe in the knowledge its fixed.

I didnt really want to tie myself to the house for a further 3 years.

I have read lots of forums and lots of reports on the interest rates and most economists dont think it will increase much more than 1% by the end of 2012 - meaning the rate for me would only be something like 3.5%, so still much better than the fixed at 4.99%

I was so gutted when I fixed the rate and the rates then dropped, now its finally my turn to enjoy some benefit just wondered what people thought AND what they think the state of the interest rate may be over the next year or two.

Thanks guys.

beecher2

I'd stick with the SVR and build up your savings as much as you can.

Cannon_Fodder

Ask any three economists and you will probably get 3 different answers. Even within the Bank of England committee that decides these things there are currently 3 "factions", recommending different courses of action.

If you wait until a rate rise is in the offing, the lender's will have already priced that in, so the fixed deals will not be so attractive. And you may find the deal you want has a horrible fee suddenly attached to it.

It is tempting to be on half of what you were on before, though.

If you are willing to stay alert to deals/news - say over 6 months - ready to pounce if signs indicate you should fix, then take a punt for those 6 months. Bank the difference in case you need it to pay a fee for a deal.

What has changed since your previous threads is further inflationary factors. Whether the BoE can ingore them and keep rates steady, or other countries like China start raising rates which damages our currency so we are forced to raise rates, only time will tell.

https://forums.moneysavingexpert.com/discussion/2756756
https://forums.moneysavingexpert.com/discussion/2801094

Personally, I'd fix. Anything under 5% is pretty low actually. You are still saving 1.14% on the previous rate. A year from now 4.99% could be a distant memory.

Mrs_Z

Hi, I agree. Why not repay the capital by £300pcm (overpayents)- assuming you can do this penalty free? That way the amount you owe will decrease so even if there is an increase the impact of it would be less.

dantheman2010

Mrs_Z wrote: »

Hi, I agree. Why not repay the capital by £300pcm (overpayents)- assuming you can do this penalty free? That way the amount you owe will decrease so even if there is an increase the impact of it would be less.

Its an interest only mortgage so over paying wouldnt make any difference. If I change to a repayment mortgage they have fees attached and considering I only have 10% equity, plus there would be a fee.

Surely if they increased BofE to 4% back to what it was in Nov 08 meaning mine would then be 6% I would be no worse off than I am now, PLUS surely so many people would become homeless etc if their mortgage interest rates shoot up.

So as overpayments are pointless I am leaning towards living for the here and the now, as per my signature, and just save what I can and keep an eye out for any changes.

I really dont want to tie myself to the house for 3 years.

nicolascowen

now where's my crystal ball ........ I'm an SVR girl then I'm not tied and my options are well and truly open until someone plays their hand ..

dantheman2010

nicolascowen wrote: »

now where's my crystal ball ........ I'm an SVR girl then I'm not tied and my options are well and truly open until someone plays their hand ..

Risky business, but I have been unlucky for the last 2 years, I worked out the extra £300 per month for 24 months = £7200.00 extra paid and I am only on interest only boo hoo for me.

I just would like a bit of kindness/luck etc etc etc my way.

I am sure they wont shoot up, perhaps a slow increase but I would kick myself if I fixed for 3 years and for a good 2 years of that it remains at 0.5/1.00% on the otherhand I would kick myself if it goes up to say 5% and I am worse off.

I am comfortable paying the current 6.13% so if it got that high I wouldnt struggle but if I am only 2.5/3% for a fair ole while I will (hopefully) have a nice accumulation of savings.

Peelerfart

dantheman2010 wrote: »

Its an interest only mortgage so over paying wouldnt make any difference.
.

Yes it would,you would owe less money and the equity you have in your house would go up, potentially opening up some better deals for you.

dantheman2010

I thought the point in an interest only mortgage is any payments only clear the interest. I didnt know I could make over payments and it reduce the overall outstanding.

Thrugelmir

dantheman2010 wrote: »

I thought the point in an interest only mortgage is any payments only clear the interest. I didnt know I could make over payments and it reduce the overall outstanding.

No not all. Additional payments will reduce the capital balance. Therefore reducing the amount of interest charged. So over time you could repay off more capital.

Some interest only mortgages do carry a restriction as to how much can be repaid in a 12 month period. Such as 10% of the balance.

If you have no plan for repaying the mortgage currently. Then using your "saving" to do so seems the best way forward.

dantheman2010

Thrugelmir wrote: »

If you have no plan for repaying the mortgage currently. Then using your "saving" to do so seems the best way forward.

I have no plan for repaying the mortgage as I am in a small 2 bed house, with my partner and we intend to start a family at some point and this house wouldnt be suitable if we have more than 1 child.

I know lots of people have only 2 bed houses and a family but that would not be our preference so dont really want to tie ourselves in for 3 years just incase.

The mortgage company have put an offer in writing for a 3 year fixed at 5.49%, the 4.99% was for 2 years but comes with a £1000 fee which is not doable. The offer of 3 years is valid until end of March, so in theory I can have Jan and Feb with the saving, clear my credit card - see what the BofE is doing and if its started to creep up then take advantage of the fixed and be able to save a couple of hundred a month, but I also have the option at that point to be debt free (other than the mortgage) and stay on the lesser amount saving a good £600/700 a month.

So for now I will leave on the SVR, then mid-March decide whether to take them up on the offer.