Fixed rate/variable motrgage

mattjack1

Hi
I'm with Scottish widows at the moment and asked if they could help me with a new fixed rate, i owe £170,000 on the mortgage and before contacting Scottish widows i asked 3 estate agents to come and view the house to see how much it was worth. Their estimate was between 185,000 and 195,000 and was told by 1 of them that it was probably worth a lot more (220,000) but not the right time to sell. Scottish Widows sent out a valuer (Surveyor) and he valued it at 170,000. Was told if I want to contest this I need to go and get comparable sales evidence of houses in the area.

Question

1. Are there any deals out there that I can switch to for 100% mortgage over 15 years. (Working on the assumption that the house is only worth 170,000) I would prefer the security of a fixed rate over 5 years.

2. At the moment the variable rate I have is 3.99% and have been over paying my mortgage by £300 a month for the last 2 months. The fixed rate would be around 5.79%. Is it worth staying with the variable rate or will the variable rate jump over the 5,79 % in the next couple of years.

I know there are no definites to the second question but if the rates do rise will this be a part of a % rise or a 1 to 2% rise. Any advice would be appreciated


Matt

beecher2

There are no 100% deals - you'd need at least a 10% deposit, ie your house would have to be valued at least £187,000. Keep overpaying to bring the LTV down to the point where you can get a deal.

Thrugelmir

Can you afford to maintain the overpayments at £300 a month or even higher?

As you will start to make significant inroads into your mortgage debt if you do. Although interest rates are forecast to move upwards there is nothing in the short term to suggest a 2% rise.

Personally I would overpay then absorb the interest rate increases as they arise. Remember the less you owe the less the impact of future rate rises.

By repaying capital you will sooner be able to consider remortgaging options. Though this may still be some years away.

shortchanged_2

mattjack1 wrote: »

and was told by 1 of them that it was probably worth a lot more (220,000) but not the right time to sell.

Sorry it's no help but that has to be one of the funniest bits of cr*p that an EA has said for a long time.

ExperiMentor

Estate Agent valuations are meaningless for mortgage purposes. What they mean is "We would suggest you put it on the market at £185-195k, we might if you are lucky find a buyer at 10-20% less than that in the current market", which matches the surveyor's £170k. But most likely they would not find a buyer at all.

So if you owe £170k, you will not be able to switch to a different lender - you are on the verge of negative equity. Overpaying as much as you can is a good idea.

However, your present lender should allow you to switch to any of their other currently-available deals, if you like the look of them. They may ignore the fact that you are borrowing 100%, as they have already taken that risk. But they may not be better value that your current variable rate.

Interest rates will probably rise by more than 2% (quite possibly much more), but will take several years to do so (that's my guess). But you are not loosing out until the variable rate has been above the current 5.79% fixed for as long as it stays below it - so if it eg takes, 2 years for variable rate to rise to 5.79%, rates would need to keep rising for another 2 years at the same rate before it would have been better to 'switch now'.

Thus I agree with 'Thrugelmir': "Personally I would overpay then absorb the interest rate increases as they arise. Remember the less you owe the less the impact of future rate rises. By repaying capital you will sooner be able to consider remortgaging options. Though this may still be some years away"