Mortgage advice please.

Norn-Iron

Hello everyone, I was just looking some advice or assistance regarding mortgages. We have a 5 year fixed rate mortgage which is coming to an end of its term with teh current lender. The fixed interest rate was around 4.8% and I rang our existing mortgage lender and enquired as to what happens now, I asked if another 5 year fixed mortgage can be taken out and was told yes, but the interest rate will be around 5% and there is a payment of around £700 to pay to take this out. The advisor then said if we didn’t take a fixed rate mortgage then our existing on automatically switches onto a tracker mortgage with an interest rate of 0.99% and no additional payment like the £699 for the fixed rate. I presume the 0.99% would be on top of the Bank of England base rate of 0.5%, equating to approx 1.49%?
I am not to “up” on mortgages, but looking at interest rates of 4.9% compared to 1.49%, the tracker looks tempting. But under the current climate (and I know it’s hard to predict) what would you advise?
Also if I was to take the tracker option, then if my payments are lower than what I am currently paying, can I continue at the same payment amount as the 5 year fixed mortgage so paying off a bit more each month? One last thing if I did take opt for the tracker and was paying more than required, if the BoE base rate did go up, then would this be just compensated or taken out of the additional money I may be paying.
For example if I was asked to pay £450 a month, but wished to pay £600, if the base rate increase and the required payment went up to £500, then would this still be taken out of my £600, not pushing this up to £650?
Any help on this greatly appreciated.

Thanks in advance.
N-I

Thrugelmir

You are very lucky to be moving onto a tracker rate of .99% above base. Particularly if it remains on this rate for the remainder of the mortgage term.

Firstly do not change to another mortgage product as you will never ever get this rate again.

The two money savvy options you have are:-

~ Overpay your mortgage. Particularly while interest rates are low thereby shortening your mortgage term.

~ Save into a higher earning deposit account then use the money to repay your mortgage at a later date. Depending on how quickly BOE base rate rises.

Personally, I am in a similar situation to yourself. So have maintained my monthly outgoings for the mortgage at the same level, but diverted part into my partners ISA while still overpaying the mortgage as well.

As to see ones mortgage reduce rapidly gives great satisfaction in these austere times.

shortchanged_2

I am not the gambling type normally and would usually go for the safety of a fixed rate, however my current mortgage goes down to 1.1% above base rate from 4.79% next month. I will definately be staying on the tracker for now as I don't see interest rates getting up particularly high over the next few years. Even if the BoE base rate went up to 4% I would only be slighty worse off than I am now and seeing as most of the 3 to 5 year products are around the 4.5 - 5% or higher for me it's a no brainer.

kingstreet

Norn-Iron wrote: »

If I was to take the tracker option, then if my payments are lower than what I am currently paying, can I continue at the same payment amount as the 5 year fixed mortgage so paying off a bit more each month? One last thing if I did take opt for the tracker and was paying more than required, if the BoE base rate did go up, then would this be just compensated or taken out of the additional money I may be paying

The lender will only debit the contractual monthly payments from your account. I suggest you set up a separate standing order for your overpayments, first obtaining the necessary bank details and reference from your lender.

In time, payments may go up. When they do, manually alter the amount of your standing order so your total payment continues at the same level.

ie Contractual payment £150 + Standing order £350 = £500 total

Rates then rise and you amend SO manually;-

ie Contractual payment £200 + Amended standing order £300 = £500 total.

GuidoT

Norn-Iron, go on that tracker for the 1.49% and save the differential.

I do not see interest rates changing to anything like the 5% offer / you are on for some years. Indeed the rate decision about half an hour ago held interest rates at 0.5% again. However, they will go up though, there can be no doubt of that.

Norn-Iron

Thanks folks for all the info and help, its relaly been appreciated and I think the tracker seems the best option at the minute, saving the difference in a savings account.

One other thing, our current mortgage was with A&L, when I rang to enquire more about this I was put through to our local branch of Santander. While speaking to an assistant, I was told that I had to phone A&L mortgage department and see what rates they give, then Santander woudl be in touch to see if they can better these. Are these two lenders not the same outfit?

Also Thrugelmir said "Firstly do not change to another mortgage product as you will never ever get this rate again." - Do I just stick tehn with A&L or if Santander better the offer should I go with them?
Seems strange that Santander who are in effect A&L are basically "competing" (if that's the correct terminology) against them?? also with no A&L high street branches (all changed to Santander) there must be no way of physically sitting down to speak to anyone, all just sorted out via the phone?

Thanks again fro all your replies and help!

Cheers,
N-I

Thrugelmir

Norn-Iron wrote: »

Also Thrugelmir said "Firstly do not change to another mortgage product as you will never ever get this rate again." - Do I just stick tehn with A&L or if Santander better the offer should I go with them?

If you took out a fixed term product with Santander , you would default onto an SVR of 4.24% (current rate) at the end of the term. Your rate of 1.49% would be lost forever.

Lending at .99% above base won't be seen again for a long long time (if ever).

kingstreet

Santander wants existing borrowers off the cheap Abbey, A&L and B&B deals where possible. Then they make more profit now and in the long term.

As the others say, stay as you are and get those overpayments chugging along!