Mortgage - What to do next?!

MrRed85

Hi,

Hope someone can advise on this!

As a first time buyer, I signed up to a 2 year tracker mortgage back in May last year with an interest rate of 4.19% (4.69% inc. base rate). After the tracker finishes (June 2012), the mortgage switches to a variable rate of 4.00%.

The monthly payments we have currently are at our affordability limit and we are concerned that if the base rate changes at any time in the next 6-9 months then we could get stung.

I have however seen as of today the base rate has been held for a bit longer (breaking news story on BBC):

My current mortgage provider have offered the chance to fix the Mortgage for 2 years from now at 4.59%, but a fee of £199 must be paid to do so.

I can't decide whether fixing it would be a good idea and paying that fee would be better than being stung by any suddeny base rate changes?

Help!

Engeroosi

Sounds like a no brainer to me, the rates are only going to go up so at least you would be protected for the next 2 years if you fix!

MrRed85

Thanks Engerroosi.

I was leaning towards the fix option, I jsut wasn't sure if there were any catches I should be aware of. The mortgage provider has been encouraging it and I wasn't sure if it was just sales chat!

USM

Surely finding a longer fix would be more helpful in terms of security? In this situation you're going to pay more than you need to plus a fee for the next 2 years and exit right in the middle of a rate climb possibly?

MrRed85

Surely finding a longer fix would be more helpful in terms of security? In this situation you're going to pay more than you need to plus a fee for the next 2 years and exit right in the middle of a rate climb possibly?

There is an option to fix for 5 as well? I thought that was not a good idea as anything could happen?

Thanks for your advice though.

dimbo61

So you are only one year into a 2 year deal and they are offering you the chance to fix for 2 or 5 years?
What is the 5 year fixed rate they are offering you ?
If things are tough now why not think long term and look hard at the 5 year deal and then overpay if you can afford too!
If you plan on staying at least 5 years in your current property and the fee to fix is not £++++ think it over

Chin

i agree - fix for 5 years

MrRed85

dimbo61 wrote: »

So you are only one year into a 2 year deal and they are offering you the chance to fix for 2 or 5 years?
What is the 5 year fixed rate they are offering you ?
If things are tough now why not think long term and look hard at the 5 year deal and then overpay if you can afford too!
If you plan on staying at least 5 years in your current property and the fee to fix is not £++++ think it over

Right thanks, in a way i'm even more undecided because I ruled out 5 years through other advice! Totally see your point though.

Got a meeting tomorrow so will find out the fix rate for 5 years. What's a reasonable fee?

Thanks all

Thrugelmir

If money is tight. Then you need to review your budget. As possibly times are going to be enough tougher. Gas and electric will be rising around 15% later in the year.

MrRed85

Ok so I had a meeting with the Mortgage provider to discuss options.

The fee to fix for 5 years is the same as two, but the interest rate is considerably higher.

What I did find out is that if the base rate goes up by 1/2 % then it is still affordable for me to pay. This was somewhat of a relief as it has taken off the immediate pressure to fix it.

I still think the fix for two years seems like a good deal (which is subject to change at any time), but if I can afford to pay my monthly repayments after a 1/2 or maybe 1% base rate increase, do people think it would be silly to pay the fix (£199) to fix?

toonboypjg

Here is my take on things, rises are a certain. I am in a position of taking a new deal at the moment. I have always gone for fixed rates at least you know what your paying for a fixed term. However I have come across several tracker mortgages at the moment which after the first three months give you the option to switch to the lenders fixed rate. My prediction is the base rate will rise to 1% by the end of 2011 so if you can find one of these deals get the tracker and look at the change over to fixed around November 2011.

By the way if you do fix £199 is a very low fee for any mortgage, and if you spread it over 5 years (well you can do the maths) £3.31 per month to get this deal.