SVR v Fixed

waterman3

I'm in a quandry:

am currently on the SVR with halifax at 3.5%. I bought the property through Homestake ( a shared equity) scheme and the fees that other lenders charge for this are prohibitive.

Therefore, the options are stay on the SVR at 3.5% or move to a fixed with Halifax at 4.59% for 3 years.

Any thoughts?

joepubli

You are paying a 1% premium for certainty over 3 years. If money is tight, this is good insurance, as the rates are expected to increase over a 3 year period - perhaps significantly.

Meeper

The correct decision will depend on your attitude to risk and how much an increase in interest rates will affect you and your monthly budget.

Burridge60

But in three years time you are back facing their then variable rate. So you don't escape the variable rate for very long.

Work out what the cost would be at a higher interest rate than the 4.59%. Say 6 or even 7% higher if you like. If you can afford that on your current income then overpay your mortgage now or put the difference aside into a savings account. If you cant then a fixed rate just buys you a known payment for the next 36 months.

Make sure your income is protected in the event of redundancy or long term sickness too!

I would rather mortgage holders see their mortgage as a debt and get rid of it as soon as possible rather than as something they use to "bet" on what interest rates are going to do in the future.

Niksan

Are there any fees with moving to the fixed rate? If so, that should be taken into account as I remember a few years back Lloyds wanting £1k to move me over to a 2 year fixed, and for a £60k mortgage that worked out an extra 0.8%APR over the term. (I think that's right, my Monday morning math maybe fubar)

VT82

Also consider whether or not Halifax are likely to pass on base rate increases on a like-for-like basis onto their SVR. I guess they probably would, although it would be entirely at their discretion if they wanted to increase it by more as rates rise (or even before).

I don't think it's linked to the bank base rate (unlike Nationwide's 2% over base rate cap). And they might in future want to 'harmonise' it with their new SVR-under-any-other-name rate which I believe is at 3.9%, by passing on more than any base rate increase.