Opinions?

mrs.butler

Afternoon all. My partner and I currently have a mortgage with Natwest which comes to an end in June. I rang an advisor on the 1st April (first day I could book rate), and they have offered us a 2 year fixed rate at 3.89% or 5 year at 5.19%.

We cannot decide which to do. We are aware that the Interest Rates are going to have to rise, so are we best to lock in for 5 years which would take our repayments up by £70 per month, or go with the 2 years which would only increase it by £2 per month?

I have been offered a regular saving rate at 8%, would we be best to save the extra £70 per month, and then pay off a lump at the end of 2 years?

Any advice greatfully recieved!

CloudCuckooLand

The "drip-feed" nature of a regular saver means that you do not earn 8% on the whole sum. It will average out at 4%.

Whether £1640 plus 4% interest will offset the interest rates two years from now, is rather difficult to say. You might need that just to improve your LTV if prices head south.

If you like certainty, go for 5 years.

Reading your other thread, you were terrified that 1 month would have an effect. I can guarantee that in two years rates will not be what they are now.

Also you didn't want to worry about it every two years...halving the number of remortgage fees you pay over the life of a mortgage, adds up.

Thrugelmir

mrs.butler wrote: »

Af, and they have offered us a 2 year fixed rate at 3.89% or 5 year at 5.19%.

Do the products have arrangement fees?

What is the follow on interest rate once the initial term has expired?

These are factors which should be taken into consideration.

mrs.butler

Thanks to you both. I must admit that although I like to be organised with financial matters, it terrifies me.

I think you may be right, as it would take the worry out of the mortgage for the next five years, dont want to be dealing with it more often then I need to.

The product fee is £199 for either rate.

anselld

CloudCuckooLand wrote: »

The "drip-feed" nature of a regular saver means that you do not earn 8% on the whole sum. It will average out at 4%.

That is not true. 8% *is* 8% for all the time the money is saved, it is just that the money is not all saved for the full term.

If overpayments are accumulating monthly it will be better to save them this way for mortgage rates up to 6.4% (basic rate tax payer).