High SVR after fixed term ends

getmore4less

betmunch wrote: »

I wasnt ignoring it on the premise you can remortgage, I was ignoring it on the premise it is unlikely to be accurate, so plan for the bit you have control over.

If you recomend a deal to a client based on the fact it is cheaper when the client gets to the SVR, but by the time you actually get to that SVR the situation has changed and the other deal would have been cheaper at that point, then surely you are leaving yourself wide open to a claim?

If you eliminate all the areas where you have to assess the risks and make judgment as part of the recomendations and stick to deals where you can work on the facts that only leaves you fixed rates.

betmunch

No it doesnt, if a client is happy with the risk of rates going up to have the benefit of lower payments if they go down theres no reason why you cant recomend a base rate tracker.
Its the banking on a rate set by the whims of a building society or bank that I disagree with, not posibility of a client having a form of variable rate.
In the OP's example if the SVR was actually a base rate tracker follow on with those rates then I would say that you are right to compare on total cost. However as hes stated the are individual banks SVR's then they will change independently of each other.

Wh05apk

getmore4less wrote: »

Size of the mortgage makes little difference to the comparitive results with the fee added or not.

You either have the money or you don't.

The difference in fees is £500 so you add to one mortgage or take it off the other then run the 10y forcast to get comparitive results

I was referring to the fact that so far we know next to nothing about th op's situation, if they have a £25k mortgage ewith 10 years to run, the SVR is irrelevant, and they should go for the deal with the lowest arrangement fee, if its a £1m int only mortgage then the rate is all important.

getmore4less

Wh05apk wrote: »

I was referring to the fact that so far we know next to nothing about th op's situation, if they have a £25k mortgage ewith 10 years to run, the SVR is irrelevant, and they should go for the deal with the lowest arrangement fee, if its a £1m int only mortgage then the rate is all important.

Sorry miss read your post you were agreeing the fees make little difference.

They said in the first post the quotes were for 25years

Still have to run the number to get the break even point which is around £48k on repayment terms over 25 years planned overpayments will shift this.

JSR

getmore4less wrote: »

Contrary to a previous post that said £85k is the break even is under £50k

Yes, you're right, of course. My estimate accounted only for total cost over the period and took no account of the amount of debt outstanding at the end. That's a pretty important, and easily overlooked, factor actually. Thanks.

QWE_2

Firstly thank you so much for all your posts even if some go over my head. Secondly sorry for not adding enough detail, I didn't want to muddy the waters.

Added details
Accepted offer £168000
Combined deposit £68000 (=approx LTV 60%)
Deal 1 needs LTV of 60%
Deal 2 needs LTV pf 75%
Both mortgages are portable but it is our first house and we have enough room for the foreseeable future so not intending to move in first 10 years (famous last words).
We hope to pay the arrangement fee up front but it might not be possible.
We have budgeted to over pay by approx £100 (both deals allow 10% of balance annually) each month but may not be able to sustain this if we have kids.

ERC-not planning on paying it off this early or selling up but you never know
Early repayment on deal 1: 7% until 2014, 6% until 2016, 4% until 2018, 2% until 2020, 1% until 2021
Early repayment on deal 2: 5% until 2016, 4% until 2019, 2% until 2021


Thanks in advance and if more detail is needed I can repost. Finally if someone could explain break even point to me I would be grateful

Burridge60

Fees and follow on rates are important and it is easy to compare their effect on your mortgage costs.

But given that we are talking about a ten year fixed rate then who knows whats going to happen. We will probably have a further two elections by then or maybe more and about six Downing Street cats.

Just pity the poor people that had their fixed rate and now can't move lenders due to a drop in house value and are now stuck with Skipton (increased their variable rate when others reduced it), Chelsea (5.79% variable rate is no joke), Britannia (not very forthcoming on their website about their SVR) Leeds 5.69%. All of these had great fixed rates which people focused on and now are regretting as they cant get away. Also Bristol and West, Bank of Ireland GMAC etc etc.

I haven't mentioned NR either the subject of many MSE threads.

getmore4less

QWE wrote: »

Firstly thank you so much for all your posts even if some go over my head. Secondly sorry for not adding enough detail, I didn't want to muddy the waters.

Added details
Accepted offer £168000
Combined deposit £68000 (=approx LTV 60%)
Deal 1 needs LTV of 60%
Deal 2 needs LTV pf 75%
Both mortgages are portable but it is our first house and we have enough room for the foreseeable future so not intending to move in first 10 years (famous last words).
We hope to pay the arrangement fee up front but it might not be possible.
We have budgeted to over pay by approx £100 (both deals allow 10% of balance annually) each month but may not be able to sustain this if we have kids.

ERC-not planning on paying it off this early or selling up but you never know
Early repayment on deal 1: 7% until 2014, 6% until 2016, 4% until 2018, 2% until 2020, 1% until 2021
Early repayment on deal 2: 5% until 2016, 4% until 2019, 2% until 2021


Thanks in advance and if more detail is needed I can repost. Finally if someone could explain break even point to me I would be grateful

Conveniently thats the £100k example.

Deal 2 is better by £900 before overpayments

ALso deal 2 is a cheaper to get out of in the early years.

There have been 2 break even points talked about.

The key one is the size of the mortgage where the deals cost the same above that one is cheaper below that the other one is cheaper over all.

The second type of break even point is how far into the mortgage is the amount owing the same.

If you take the deal with a larger fee you have to borrow more up front, but the interest rate is a bit lower so you over pay a little bit each month and slowly pay off the extra borrowing.

in you example you start of £500 more and end ups at the end £900 better off there is a point in the midlle when both mortgages would have the same outstanding value.