Nationwide Fixed Deal due to end in June 2011

squires55

Hello,

Using this as a mechanism to clarify my thinking and hopefully gain opinion on the best course of action.

My 5 year fixed at 4.69% deal with Nationwide end in June 2011, reverting to the BMR of 2% above BoE rate (currently 0.5%).

Current debt is around £58200, with a redemption date of Oct 2016. Mortgage is part interest (£26000) and part repayment. The interest only part covered by initially 2 endowments taken on prior properties.

I've since cashed in one of the endowments and now overpay £150/month (since 30months ago) to make up the shortfall resulting from that endowment - the capital from this was used to fund some home improvements. Leaving approximately £14K to be covered off by the other endowment. Current projections show that this endowment (orginally meant to pay off £32K) will pay £15K at 5% return over the next 5 years and is subject to a terminal bonus.

My thoughts on the future are;

Revert to BMR and continue paying the same cash payment as now as this will eat into the capital (it's about £70 month difference between the current 4.69 and BMr of 2.5%) and either reduce the time I have to pay the mortgage or have more left over from the endowment payout(Not decided on this as yet).

Anyone see any flaws in this? Or any avenues that would present a better return in either time to pay off the mortgage or bigger lump sum from the endowment. Any benefit from cashing the other endowment and then paying off the mortgage now? or putting into high interest savings? Realise interest rate have a part to play in any decision making process but that a tough call to decide when they'll rise!

Any other thoughts or advice greatly appreciated.


Squires55

Thrugelmir

squires55 wrote: »

Revert to BMR and continue paying the same cash payment as now as this will eat into the capital (it's about £70 month difference between the current 4.69 and BMr of 2.5%) and either reduce the time I have to pay the mortgage or have more left over from the endowment payout(Not decided on this as yet).

There are few lenders that will offer a better rate than this. So personally I would continue to overpay by as much as I could comfortably afford. Interest rates will rise at some point in the future. So the quicker the debt is repaid the better. If you then end up with a surplus from the endowment policy it will be a nice bonus. With 5 years left to run best to continue with it. As the terminal bonus does constitute a high proportion of the policy value.

ray123

Rather than overpay, you could initially use up your ISA allowance. Santander are offering a rate of 3.5% (for account holders) or nationwide are offering 3.1% for eISA. Once the allowance is used up for the tax year, then make overpayments.

Not to clued up about endowments so cannot offer advice.

For the mortgage, it is advisable to Revert to BMR of 2.5% which is a market leading rate.

TrickyDicky101

The great thing about your mortgage with Nationwide is that it is extremely flexible: even if you make overpayments to the mortgage, you can request a "drawdown" from the overpayment reserve should you find you need cash (note I am presuming that this facility is available to you - I would confirm with Nationwide). BoE base rate won't remain at 0.5% forever, and it is likely that subsequent increases will mean your mortgage rate exceeds what is available via ISA.