Fixed rate ending soon

universalady_2

We're on a fixed rate with C&G which finishes in June this year, we currently pay about £780 with me overpaying by £70 each month, so £850 in total. When this ends in June, we should be paying about £650 a month according the the BOE base rate at present + any overpayments I set up.

My question is, do I sign up to another fixed term (I do like knowing my outgoings each month) or, do I pay whatever the amount is monthly and make an overpayment? I want to try and clear our mortgage ASAP, so if I leave it to track the base rate and make overpayments, will I pay it off sooner? I guess if I leave it to track the base rate, I can sign up for a fixed rate at any point?

Our mortgage is approx 125k, with equity of about 165k in the property

linz

Don't think there's a magic answer to this one but i'm in the same boat as you, my fixed rate of 5.44% ends in June and my aim is to throw as much at the mortgage for at lease two or three months whilst studying the rates at the same time. Will look to fix again for sure, just don't know when! I think it's good to make the most of the SVR and overpay as much as you can as soon as your fixed rate is up whilst looking hard at what's on offer for other fixed rates at that time.

elantan

mine is due up in April as well ... i think i am going to get another fixed rate ... i liked the idea of knowing how much my mortgage was every month ... hopefully i will only have to have this one and one more and i will be done with my mortgage (fingers crossed)

good luck whatever you decide

Jonbvn

It depends on the outlook for interest rates.

Personally, I think rates will be very low for years to come, and I am more than happy to track the base rate.

alex_p

Yes it depends on whether you think rates will go up or stay (they are very unlikely to go lower). If they do stay low how long for? And can you afford the overpayments should rates increase? These are a matter of opinion and financial situation and will vary for different people. Key is to make your own mind up what works for you!

My mortgage fixed rate ended and the rate jumped from 4.39% to about 6% a few years ago. However I thought I would wait a bit and see what happens. Then the financial crisis hit and my rate fell to 1.49%. Banks called me up to try sign me up to a fixed rate of 4-5%. For me it seemed silly, I decided to stay on the float rate which allowed me to make overpayments. For me, to switch to a fixed rate while the base rate is so low seems silly.

Jonbvn

alex_p wrote: »

Then the financial crisis hit and my rate fell to 1.49%. Banks called me up to try sign me up to a fixed rate of 4-5%. For me it seemed silly, I decided to stay on the float rate which allowed me to make overpayments. For me, to switch to a fixed rate while the base rate is so low seems silly.

You do realise that with such a low rate, it would be much better to save than OP your mortgage? As an example LTSB are paying 4% on their classic vantage current account up to 7k (you can have three).

alex_p

Jonbvn wrote: »

You do realise that with such a low rate, it would be much better to save than OP your mortgage? As an example LTSB are paying 4% on their classic vantage current account up to 7k (you can have three).

Lets do a calculation:

7K @ 4% = £280 per year received. Let's take away the tax @ 40% = £168.

Now my mortgage:

20K @ 1.49% = £298 per year interest paid.

Suppose I overpay by 7K versus saving 7K:

13K @ 1.49% = £193.70 per year interest.

- (£298 - £193.70) + £168 = £63.70

So you are right the difference is £63.70 over 1 year. However there will always be alternatives where to put your money for me I really want to pay off my mortgage and forget about it - so I prefer to overpay even if I lose £60 odd over 1 year.

dimbo61

For me its all about the LTV and what sort of deal you can get when your current fix ends.
If you can get a 5 year fix for about 4% then take it and think long term!
The sooner you are mortgage free the better and the more interest you save.
If you want to gamble then put £50 on the black dog in the 3.30pm at Kempton and not with your home

alex_p

dimbo61 wrote: »

For me its all about the LTV and what sort of deal you can get when your current fix ends.
If you can get a 5 year fix for about 4% then take it and think long term!
The sooner you are mortgage free the better and the more interest you save.
If you want to gamble then put £50 on the black dog in the 3.30pm at Kempton and not with your home

lol! Good point! However I like to ride the floater wave!