track or fix query

northerner999

I am in a similar situation to the OP so thought I'd post my plan of action in the hope it will help.

I am coming to the end of a 3-year fix with Halifax which was at 6.75%, taken out in December 2007, and am moving onto their SVR which currently stands at 3.5%. My mortgage payment is now £393 pm, with £97K owed on a value of around £140K on a two-bed flat.

Although the 6.75 rate seems high with hindsight, this was before anyone had heard of the credit crunch and I took it out as I was about to move to the Middle East and needed permission to let temporarily. My new job was well paid and tax free so I've ended up better off and able to make a few decent overpayments and wipe out what was left of a graduate loan.

My job situation is fluid, I work as a freelancer and 95% of my work is with a major company in my field (media). I am currently on a fixed-term contract with the hope of this becoming a permanent job. I eat through several grands of savings over the summer while establishing myself as a freelancer after a move back to the UK, and would have enough if I was unemployed again for six months or so but not much longer..


Here is my plan, which I would suggest is suitable for the OP as guidance.

1 - My first plan is to add a bit more to my savings pot. I am 27 and single, but my experiences of this summer have told me to have enough to survive a year of unemployment at all times. I will not make any overpayments on my mortgage until I have increased this back to the level I was at this summer, which I would estimate in the best case scenario to be May but more likely July/August.

2 - Once I hit my figure, I will overpay my mortgage as much as is possible. I understand the logic behind those who argue to instead put the money into safe places and earn interest while lending rates are low, but I would rather clear debts. The best rates of savings interest are not that much greater than lending rates in the grand scheme of things. This is of course a personal choice and there is no right or wrong answer.

3 - If I can get a permanent position out of my current employer then I will look for any long-term fixes on offer. I have no idea what I could get at the moment and am not looking until I have a full-time position to go to lenders with. I would like the security of knowing I will not have to pay more than a set fee a month for the next five years. The credit crunch showed me quite starkly how quickly things can change, and the only way current rates are going is up. I could easily add £50 interest a month to my costs but I don't like the long-term uncertainty.


I hope that is useful, my suggestion to the OP would be not to consider the £130 as more money to spend on yourself. If you need to build up a savings pot, £100 a month into a good ISA will soon build up. If you think you're sorted for worse-case scenarios then put at least some of it towards overpayments, even if you kept half to treat yourself than £70 a month will make a huge difference towards your mortgage.

dimbo61

I dont like paying interest to my lender and worked out a few years ago that the quicker we repaid the debt the less interest we paid.
I am also a great fan of offset mortgages now 2 lenders are doing 5 year offset fixed deals under 4%
YBS and FD.
Build up savings in the offset account and overpay and become mortgage free ASAP

2011_will_be_debt_free

Im in no way an expert here but this is what I would do.
Keep the very low interest rate you have now but pay into it what you were paying before, since you were happy to pay that before and managing then why not be paying off the capital - especially when its more affordable for you to do so (more going to pay off capital preventing more interest paid in the long term) at the same time get a savings account that pays more interest than what the morgage is charging and put what you can afford into that each month with a view to putting it against your morgage when the interest rates are showing signs of rising so that you pay even more off using the money made from the savings and get the cheapest fixed rate you can at that time, so you know that it will not go up further but you have made substantial difference to the capital, so less for interest to be charged on.

Really no expert and not based on much other than what I think makes sense to me but its what I would do if I could. I'm focussing on getting debts paid off this year and then I will be starting a MF challenge from there on.

I agree with northerner999

Gorgeous_George

Nationwide's BMR (currently 2.5%) is effectvely a base rate tracker that tracks at no more than 2% above base rate. I really wouldn't switch to a fixed rate at the moment.

GG

egor110

Thanks for sharing your views.
My nationwide fix was 6.08% , will owe just under £66000 end of jan

I was paying £629 month which i was comfortable paying, although my thoughts are i missed the low interest boat in 2009-2010 do i now jump to a fix at a good rate now or do i wait and maybe miss that boat , as the fixed rates will rise as soon as the intrest rates rise.

I could get a fix with yorkshire building society for 4.99 for 10 years, which would cost me £698 month over 10 years or £650 month over 11 years total amount payable would be £83695 and £85896.
I think 4.99% is a fair rate for such a long fix and is amount i've been paying for the last two years.

Gorgeous_George

egor110 wrote: »

Thanks for sharing your views.
My nationwide fix was 6.08% , will owe just under £66000 end of jan

I was paying £629 month which i was comfortable paying, although my thoughts are i missed the low interest boat in 2009-2010 do i now jump to a fix at a good rate now or do i wait and maybe miss that boat , as the fixed rates will rise as soon as the intrest rates rise.

I could get a fix with yorkshire building society for 4.99 for 10 years, which would cost me £698 month over 10 years or £650 month over 11 years total amount payable would be £83695 and £85896.
I think 4.99% is a fair rate for such a long fix and is amount i've been paying for the last two years.

I also think that 4.99% is a fair rate over 10 years. It would be difficult to argue against taking such an offer.

It provides security. You may pay a few grand more or many grand less than you need to but that securuity has a value.

Do what you think is right and sleep soundly.

GG