SVR or fixed again?

Thrugelmir

dantheman2010 wrote: »

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.

The house is irrelevant. You have a mortgage debt that at some point in the future will need to be repaid.

With the tightening of mortgage lending criteria you may find it difficult to obtain an interest only mortgage when you move.

Low interest rates aren't going to last forever. So as the saying goes "Make hay while the sun is shining".

dantheman2010

I wouldnt be looking for an interest only when we got a slightly bigger house. My aim would be to sell this, take out the equity and apply to savings (that dont really exist at present) and put toward the deposit of the bigger house. I would do repayment if I were in a house I intend to be in long term.

Thrugelmir

Your orginal question was whether to fix or not. When you intend moving makes a difference to any suggestions..

Interest rates aren't going to remain at current levels indefinately. When they rise, there is a potential risk it could be sharp.

So you've possibly only a short time frame to play with your "savings".

The upside is that when interest rates rise. The property you aspire to will become cheaper relatively. In that the gap between your property and the new one will narrow.

If you can earn over 2.7% net from your savings then it will make you more money than overpaying the mortgage.

dantheman2010

But surely if I intend on moving within the next 3 years, fixing it and having a 3% of the outstanding balance early payment charge does also need considering when deciding whether to fix or not.

If the rates rise sharply then I am sure a lot of people in this country will become bankrupt / homeless, trying to find the extra money each month.

Basically the base rate would need to rise from 0.5% to 4.5% for me to be about where I am currently (+2% = 6.5%, so not much more than at the moment).

I cannot see it rising that sharply over the next year or two, but obviously I am no expert.

My decision is to take Jan/Feb at SVR and see at the beginning of March whether there is any change/talk of change in the BofE, if at that point I have cleared my debt and it looks like there is a change I may take the lender up on their offer valid until the end of march.

For me, there is only one disadvantage of the SVR and that is if the BofE goes higher than 4.5%.

Squish_21

You should be ok on SVR for a while.

Im on SVR at the moment as trying to sell my flat and cant be tied again.

I have an repayment mortgage though and an overpaying to the max amount allowed.

whatyadoinsucka

i got a mortgage in oct 2009, at the time i spoke to two independent mortgage consultants both said get it fixed (best rate 6.25%).

Instead we decided to go see a friend of a friend (also qualified) who had exactly the opposite outlook get an interest only and overpay as much as you can. just over a year later we have managed to overpay £14k I'm now paying Base plus 2% thats a saving of 60% (2.5 / 6.25), which we are pumping into the mortgage. £130 is now £106 (got a little inheritance too)

You need to look into 'overpayment charges (mine is unlimited HSBC), and also if you get a fix when will it go onto variable.
If you took a 2 year fix today I'd say you'll be in trouble in Dec 2012 as you'll either have to remortgage or take the higher rate anyway

In my personal opinion base rate isn't going up too much (max 2 or 3% short term ie 1-2 years), far too many job losses planned public sector, forget what these analyst say about inflation, we are in an unknown time.

good luck and if you can get a cheap fix go for it, but I'll take the risk/return currently being offered on the SVR

dimbo61

I would also stay on the SVR and split the savings 50/50 with half going on overpayments and half going on clearing other expensive debt CC and then building up savings in cash ISA,s
Good luck

getmore4less

Base + 2% keep it and save, also look at porting it to the next place you won't find money as cheap as this for some time.

I cant see why people even consider giving up these good tracker rates when they don't need to fix.

adamjth

getmore4less wrote: »

Base + 2% keep it and save, also look at porting it to the next place you won't find money as cheap as this for some time.

I cant see why people even consider giving up these good tracker rates when they don't need to fix.

I have been in this dilemma this weekend as I have a tracker that is about to revert to Nationwide BMR (from 3.69 Tracker to base + 2 %) I have been seriously tempted to go to BMR and overpay or shorten the term. However I had also been looking at the fixes and after much thought gone for First direct 3.89% fix for 5 yrs ( £99 setup) Today's Sunday Times article in the money section swung it for me as they reckon that the next year the fixes will move to over 4% and I have to be careful as a single earner in the family with 2 young kids and my wife is a housewife. Also I am not planning moving house for that period as my son has just started school

keep wondering if I have made the right decision...
Adam

opinions4u

adamjth wrote: »

keep wondering if I have made the right decision...

It's a close call. For what it's worth, I think you have made the right decision. If the fix was 5.99% then perhaps not. But I don't know and neither does any economist, journalist or internet poster.

If it turns out to be the wrong one (only hindsight can tell you), don't beat yourself up over it. It's a decision made for the right reasons and protects your family from risk of rate rises until 2016.