To Track or to Stick.

philmak

We are in a 5yr fixed mortgage with HSBC,at 5.89%,this runs out in march 2012,we owe approx £56k on our house, present value approx £230k.We popped in our local branch the other day just to enquire what else was available,right or wrong we asked about a Tracker,this is where we would like some sound advice as our heads are at bursting point.We are paying £730 per mth this includes an overpayment of approx £120 we have another 11.5 yrs to go.HSBC are offering us a rate of 2.29% approx payment of £434 a mth with no upfront costs,except we would have to pay £700 to come out of our present deal.If we keep the payments at £730 we would pay off the mortgage in 6.5yrs. Is it a risk ? and is it worth taking.All the Best!

VT82

The Early Repayment Charge of £700 seems remarkably low at 1.25% of your balance.

Assuming rates stay at their current level for the next 13 months (which is the only relevant period), you will be paying a 1.25% fee to knock 3.6% off your mortgage rate for 13 months. It's therefore a good deal. But you can only judge whether or not it is a good deal until the end of your fixed rate period - rates won't stay at the same rate for the next 6.5 years, and you would be able to overpay more when your fixed rate comes down anyway.

Would you be tied in to your tracker for a couple of years if you switched, and is it a tracker for the whole term of the mortgage or just for a couple of years before reverting to their SVR? Does your current fixed rate revert to their SVR next year?

philmak

Hi,Yes the mortgage reverts to their SVR, this tracker is for the remaining term of the mortgage,as far as we know no tie ins,and the option to pay off as much as we can as soon as we can with no penalties,where as we can only pay up to 20% with current mortgage.

VT82

Moving from something which will revert to their SVR to a lower BBR term tracker is an added bonus. It's unlikely their SVR will ever be less than 1.79% above BBR.

Even if you stayed on your fixed rate until it expired, you would probably be looking at an arrangement fee to remortgage then (which is currently being waived with this best buy).

I would go for it, and their product design people should get a kicking for allowing such low ERCs on their fixed rates.

philmak

We have not recieved any paperwork yet,but are on the understanding that ERC will go down approx £1 per day,and the reason it is at this value is because we only have 15 mths left to go on our 5yr fixed rate. We have to decide within 28 days of recieving the quote.

naspencer

First Direct and HSBC both have several very good mortgages on offer with very low fees (£99) or non at all.Have you looked at other options such as 5 year fixes or offset? Worth considering before committing yourselves.