life time tracker with woolwich how does it work

mikem425

hi,
my current mortgage deal ends in may 11 and just recieved letter from woolwich stating that they are going to automatically change it to a lifetime tracker mortgage .i have written down the contant of the letter below but have 1 or 2 questions at the end .

the lifetime tracker mortgage rate is currently 1.45%variable.it is in line with barclays bank base rate. so the rate you pay will never be more than 0.95% above this.The overall cost for comparison is 1.5%.

they then go on to say that this is not my only option.

That below they have highlighted a fixed rate product that which is available on a first come first served basis.

2 year fixed rate untill 31.05.13 followed by the barclays bank base rate plus 2.5%

initial mortgage rate 2.99%

variable rate following initial rate currently 3.49

application fee payable £nil

my questions are would there be a fee for the lifetime tracker as i have been on the woolwich website and it has a round 3 or 4 lifetime trackers and all incur as fee of 999 pound.

secondly if i choose lifetime tracker i dont understand what my interest rate would be if i am reading the letter correctly would this be 2.45%

thirdly what are the pros and cons for each offer in your well advised opinion or are there other more attractive offers with the woolwich,

I am relativly new to the site and all opinions would be most welcome
i need this explaining in lehmans terms as when i check the websites out i cannot make head nor tail of them.

thanks mike:beer:

rothers

If it automatically goes onto the tracker then there shouldn't be any fee. Your tracker will be 0.95% above the base rate (currently 0.5%). If I were you, I'd bite their hand off!! I'm on a lifetime tracker of 0.17% above the base rate and I can't ever envisage a situation where I will change mortgage. On top of that, you can make over payments.

You seem to have a good mortgage there! Good luck!

kingstreet

The tracker you're describing is what's known as the reversion rate. This is what your mortgage reverts to when your initial offer ends. If you look back to when you took out your mortgage, you should have a Key Facts Illustration and a Mortgage Offer which describes this in detail.

You do not have to pay a fee as this is the "default" option.

The rate is very good as it was set when rates were much higher and it would have been expected to be in the region of 6%. With base rate at 0.5%, it is of course much more attractive and the lender will make a lot less profit. Because of this, Barclays is offering you other products which charge fees and which have "today's" reversions which are much higher.

Base rate is 0.5%, the differential or premium is 0.95%, so the rate you will pay now is 1.45%. If base rate rises, your payments will rise, but the rate will never be more than 0.95% higher than base. Barclays base rate is currently the same as the Bank of England base rate, however I'm not sure if they can be different and Barclays could raise theirs to break the link.

If you need the certainty of knowing what your payments will be, you could choose a fixed rate option, but this would mean giving up a very attractive reversion rate. You might want to give this some thought as other opinions come in.

mikem425

kingstreet wrote: »

The tracker you're describing is what's known as the reversion rate. This is what your mortgage reverts to when your initial offer ends. If you look back to when you took out your mortgage, you should have a Key Facts Illustration and a Mortgage Offer which describes this in detail.

You do not have to pay a fee as this is the "default" option.

The rate is very good as it was set when rates were much higher and it would have been expected to be in the region of 6%. With base rate at 0.5%, it is of course much more attractive and the lender will make a lot less profit. Because of this, Barclays is offering you other products which charge fees and which have "today's" reversions which are much higher.

Base rate is 0.5%, the differential or premium is 0.95%, so the rate you will pay now is 1.45%. If base rate rises, your payments will rise, but the rate will never be more than 0.95% higher than base. Barclays base rate is currently the same as the Bank of England base rate, however I'm not sure if they can be different and Barclays could raise theirs to break the link.

If you need the certainty of knowing what your payments will be, you could choose a fixed rate option, but this would mean giving up a very attractive reversion rate. You might want to give this some thought as other opinions come in.

Thanks very much. (both of you who have responded)

In your post you were spot on when i fixed my mortgage it was at 6% .the new rate should take effect in may i owe around 58,000 and at the moment am paying around 410 pound a month .

How much roughly do you think i would save on the new rate.
i have tried mortgage calculators and they all seem to be for new mortgages.

Also if i decide to let it ride on the lifetime tracker when eventually interest rates start to rise and i needed more security as to know how much im paying out each month would i incur a fee then.

I have had a good look round the site and am aware of the boe decissions over the last few months on the interest rate hike .

I am thinking if letting ride on the tracker and then when the boe base rate rises to aroiund 3 % maybe looking at getting a fixed then. I know there are not any guarantees about rates but from what i have read it could be around 1.5 per cent next january.
so letting it ride till 3 per cent is this a good idea? :beer:

Spangled

When you switch onto the lifetime tracker (which is a GREAT deal), you could overpay each month and continue to pay as if you were on the 6% rate. That will help insulate you against further rate rises and pay off your mortgage quicker.

Jenniefour

Enviable fantastic rate! Resist all sales/scare talk from Woolwich!

Yes, interest rates will go up at some point but the way the economy is (very poorly) it's more likely they will go up slowly in quarter percentage points.

opinions4u

Get in the habit of saving the reduction in payments that you're about to enjoy.

Either by overpaying, or topping up ISAs etc.

Ringfence these savings for future debt reduction. Don't fritter it away.

rothers

opinions4u wrote: »

Get in the habit of saving the reduction in payments that you're about to enjoy.

Either by overpaying, or topping up ISAs etc.

Ringfence these savings for future debt reduction. Don't fritter it away.

Exactly, I am saving the difference between 6% and 0.67% in an ISA for when rates go up. I don't want to get used to having so much extra cash because when rates go up it would hurt not to have it anymore.

getmore4less

Don't overpay the mortgage just start saving in ISAs or monthly savers which pay more.

If you want to keep it simple just use barclays products.

My guess is that savings will probably stay above the rate you have.


Check if your product has the offset conversion option, some did, this may come in handy if rates go up

getmore4less

i have tried mortgage calculators and they all seem to be for new mortgages.

Just stick your numbers in they work for al mortgages

you need outstanding amount, outstanding term and rate

Gorgeous_George

Hi mikem

Assuming your current fixed rate was fixed for 5 years on a 25 year mortgage and at 6%, I calculate that your original mortgage was £65,000. If my assumption is right and you have 20 years left, your new repayment should be £280 (all estimated numbers).

GG