Booking a fixed rate?

pledgeX

So today I learnt that it's possible to pay a £99 booking fee with Nationwide and they will 'hold' their current rate on a 5 year fixed deal (4.79%) for 3 months that will tie in with our DIP we got from them yesterday.

Bearing in mind this is the best rate we can find at the minute, and is right at the top end of what we can afford, do you think it's worth paying this? If it rises again it might mean we can't afford the house we are currently negotiating on so I'm tempted.

Obviously if we don't put in a full application for the mortgage in 3 months we lose the £99.

The thing putting me off at the minute is that the rates have only just gone up this past week, is it likely to go up again in the next couple of months? I'm not sure how frequently rates change.

Is there any chance rates could go down? Either their rates or another lenders. I can't think of a reason why it would drop, and even if it did we wouldn't be to fussed about losing the £99 as it's not a massive amount of money in the grand mortgage scheme!

Anything else I'm missing?

Thanks for any advice.

BadgerFace_2

Sorry, but if you can't afford any higher than that (low) rate, you can't afford the house.

pledgeX

BadgerFace wrote: »

Sorry, but if you can't afford any higher than that (low) rate, you can't afford the house.

How do you know that? I'll still be saving money after all my outgoings including the mortgage repayment at that rate. It's not like i'll be spending every last penny of my income on the mortgage. And it's a 5 year fixed which is plenty of time to hopefully increase my salary, and if I don't and rates sky-rocket I'll have to down-size.

WellKnownSid

pledgeX wrote: »

And it's a 5 year fixed which is plenty of time to hopefully increase my salary, and if I don't and rates sky-rocket I'll have to down-size.

...assuming there is sufficient equity in your property at the time to allow you to do so - which would go against current thinking on the housing market.

There are plenty on the forum who have come to the end of their fixed rates with no plan B... A mortgage is for 25 years, not just the fix rate...

pledgeX

WellKnownSid wrote: »

...assuming there is sufficient equity in your property at the time to allow you to do so - which would go against current thinking on the housing market.

There are plenty on the forum who have come to the end of their fixed rates with no plan B... A mortgage is for 25 years, not just the fix rate...

True, but I have a 30% deposit now and would have paid off 5 years worth of the mortgage by the time the deal runs out, so would be surprised if house prices dropped by that much to leave us in negative equity. And even if they did I could afford rates at about 8%, but admittedly that would be saving nothing. And if house prices drop that much and we're really in trouble, I can get hold of 30k in a real emergency.

If all this happened and we're still in negative equity I think the country would be in a whole world of problems!! You can never be 100% sure you can afford a house, but I think we are in quite a good position.

Tabatha_Kitten

First you say 4.79% is right at the top of what you can afford and then you say you can afford rates at around 8%.
Im confuddled !!

pledgeX

Tabatha_Kitten wrote: »

First you say 4.79% is right at the top of what you can afford and then you say you can afford rates at around 8%.
Im confuddled !!

~8% I can technically afford, i.e. I'll still be in the black at the end of each month albeit with zero savings and no spending with the exception of the bare essentials. This wont be enjoyable and is not a long term solution, but at least I'd have a roof over my head.

~4.79% is realistically what I can afford imo, i.e. I'll be able to go out and spend money, have some fun, and still be saving money for the future.

theduke2011

To address your original questions, you may be able to book a rate with Nationwide - however from experience it may mean submitting a full application and the lender may expect you to continue with your application (hence the fees being non-refundable).
Regarding rate changes, its always difficult to say what rates are going to do. Although the base rate is still set at 0.5%, many lenders have increased their fixed rates already this year. Therefore you may wish to secure a rate now if you're worried about costs going up. Also, theres no harm in submitting an application while your negotiating your purchase - if the property falls through, the application should (please check with lender) be able to be placed on hold for a certain amount of time to allow you to find a new property, whilst still securing the rate.

I hope this helps, a quick point around the comment you made about the house being 'affordable' - its always important to remember not to stretch yourself and getting in to financial difficulty in the future. As other posts indicate, interest rates are historically low and you may be paying a higher interest rate in the future after your 5 yr fixed expires.

Regards,
D

dimbo61

I have just finished a 5 year fix at 4.74% and was very happy with my decision!
Have you got the property ? You are putting down a 30% deposit GREAT !
Have you had the valuation/survey done and is it the same value as you are paying ?
Do you plan on staying at least 5 years ERC if you want out early ?
Once you have the mortgage can you overpay ? £500 a month would make a huge difference over 5 years

BadgerFace_2

pledgeX wrote: »

How do you know that? I'll still be saving money after all my outgoings including the mortgage repayment at that rate. It's not like i'll be spending every last penny of my income on the mortgage. And it's a 5 year fixed which is plenty of time to hopefully increase my salary, and if I don't and rates sky-rocket I'll have to down-size.

Hi,

My comment was a (reasonable?) assumption based on your comment that it would be at the top of affordability. It was however a little brief!

I've had the same points to consider recently and came to the conclusion that although I could afford the mortgage @ 10%, things would be so tight that I wouldn't have enough spare to say have the exhaust done on the car etc. so could end up getting into debt.

If you look at rates since 1970, they seem to have spent as much time in double figures as they have in single, so it's a real possibility..not for a while I might add, but 10 years time?

pledgeX

theduke2011 wrote: »

To address your original questions, you may be able to book a rate with Nationwide - however from experience it may mean submitting a full application and the lender may expect you to continue with your application (hence the fees being non-refundable).

Aah, thanks Duke, I didn't think about that. I was under the impression that it was just a one-off payment that you secure the rate, but could back out if you wanted to, i.e incase another lender lowered their rate (obviously losing the £99).

I wouldn't want to pay the £99 if it tied me into the application and meant I couldn't back out. Or if it meant having a black mark against me on my credit report for part applying to a mortgage and backing out. Sorry if these are silly questions, I only heard about this term yesterday and havn't been able to find much info on it.

And thanks everyone for pointing out the possibilities of rate rises. I know this is an important factor when looking at getting a house. But as I have said, I think we are in quite a good position and don't believe we are stretching ourselves and making a silly decision. After all, no one can predict the future, interest rates might go up to 15-20% then pretty much the whole country will lose their house, you never know!!