mortgagae advice

dprovan

Hi all,

I am looking for people's oppinions, I appreciate that no one can be certain of anything but I am equally sure that the collective views here are likely to be more informed than my own.

Here is the story: I took out a remortgage 4 years ago for my current house. The mortgage was £245k in total and I assumed I was on a 5 year fixed rate. I phoned my bank today to explore my options (I thought there would be penalties if i changed but wanted to see where things lay).

I was advised that there are two parts to me mortgage

part 1 owe £99,033.96 19 years left. Currently on fixed rate of 5.19% until 31st Aug 2011. Then switches to banks variable rate currently 4.99%

part 2: owe £121, 203.96 19 years left on fixed rate of 4.79% ends 28th Feb 2011. Then switches to 0.99@ above bank of England base rate for life of mortgage.

As you will tell my fixed rate was taken before the crash so I have been paying more than the base rate... You take your chances... But I am reading this that part 2 now looks very attractive at least for the time being....I appreciate that rates are predicted to increase but I am thinking I have some room to play with before I would want to consider changing that given that banks variable rates are roughly 4% above bank of eng rates. Is this basic assumption sound?

Re part 1. They could not offer me anything better than 4.99% and told me to phone nearer the time.

GuidoT

Stay where you are for now, avoid fees and take the benefit of a deal that you will not get anywhere else now.

You need to check the small print to see if there is a collar, i.e. if rates go below 2% then as far as the banks are concerned you end up with 2% as the minimum plus your tracker percent. But even if you have collar around the 2% still a good deal. Trackers are running around the 3-4% above base now.

dprovan

Thanks Guido,

my bank confirmed that my rate would be 1.49% at todays rates for part 2...

GuidoT

Good stuff, I have similar lifetime tracker on 0.95% above base - a great deal until rates go up.

redb_2

No - you have a large outstanding balance on your mortagage

Start looking now for a new fixed rate mortgage and reserve the deal ready to take it up come the end of august.

First direct had a 5 year fix for 3.89% with a £99 fee (but it was pulled this week) . Find yourself something similar with a lowish interest rate and a low reservation fee and get it reserved. Come the summer you will be able to make a better judgement on interest rates (we might already have one or 2 by then) . If you do not wish to take it then fine you just let it lapse and lose £99.

The tracker rate is good, but the SVR rate is going to hurt - especially as banks will move SVRS up by 0.5% when base moves up by 0,25% - to boost their profit margins

Reserve now - spend £99ish pounds - could save you many thousands in the future on that large outstanding balance

red

dprovan

Hi,

so part 1 of my mortgage needs addressing and part 2 is good for now.....

Will I be able to split the mortgage though? I am assuming I cannot leave part 2 with my current mortgage provider and move part 1 to someone else... Assuming this is correct, I am thinking I should try and get a reserved fixed rate deal with my current mortgage provider for the part 1 when I am inside the 5 months to the current deal runs out so that would be march and let part 2 run its course for now....

As I said earlier the bank said they could offer me nothing except the standard variable on part 1 but to phone when inside the 5 months... Is that normal? No choice/options until inside the 5 months...

GuidoT

I do not think a lender is going to allow you to split and have two separate mortages on one property with two different lenders.

You need to consider how much head room you have or your amount of disposable income, if this is at a comfortable level then take the risk and stay, but if you need certainty then get something fixed sooner rather than later - redb's post above looks like a good idea.

Another thing to think about are you income multiplies, is a new lender going to give you a mortage at all? When you took out the mortage originally the banks just about lent to anyone, as I am sure you are aware it is a different story now. It maybe that you are forced to stay where you are. To support a £220K mortgage, lenders will want to see an income of £40K - £50K.

dprovan

Hi Guido

thanks again for the input.

Income wise we should be ok. My income is £46k and wife is £27k. I am thinking my best bet is definately to stay with same mortgage provider alliance and leicester (santander) and get part 1 (variable) onto a fixed rate and leave the tracker part as it is (as it is a couple of percent lower than the market) for the time being.....

getmore4less

Keep part 2 if you can and see what the lender will offer for part on part 1 when the time comes.

If overpaying make sure it is all on part one.


See if they will extend the term of part 2 and/or go interest only so you can pay more on part 1.


People on low rate trackers should think seriously about keeping them the long term benifit of these will probably outway the short term benifits of fixing for a while.

redb_2

Would agree about keeping low interest trackers - I have one myself and i am not moving. However, what you have is not just a tracker. Current interest rate on your mortgage is

£k £k
99 * 4.99% = 4.94
121 * 1.5% = 1.82
Total 6.76 which is 3.07% interest

If the base rate moves to 1.5% and SVR moves up not by 1% but 1.5% then you are charged

99 * 6.49 % = 6.43
121 * 2.5% = 3.02
Total 9.45 which is 4.3% interest

At 4.3% interest then those sub 4% 5 year fix deals start to look very attractive. If you were just on SVR then i would say move - if you are just on tracker then stay - but you are right bang in the middle so its a difficult call.

Go to your current lender and see what they can offer you for the part 1 mortgage - talk to them next week. If they cant offer anything decent then start to look elsewhere and reserve a deal.

Good point about the income multiples. Also, to get the good deals you will need a decent LTV

good luck - its not an easy call

red

dprovan

thanks again guys,

my mortgage company cannot offer me nothing re part 2 until March...

my LTV is a difficult call. I am in N Ireland and the market is even crazier here than in mainland uk..... Very little and i mean very little is selling so it is hard to value houses ... However I would be confident that the house is worth at least 310k (it would have been nearer 400k at height) against borrowing of 220k... so LTV seems reasonable, I hope......