FTB First mortgage, which one???

Daniel_gecko

Hi folks,

I am taking out my first mortgage. I am still in my early twenties so have plenty of time to pay it off, so probably a 25 year term?? I have a 25% deposit, maybe 30% at a stretch. The house price is 170,000, so the mortgage will be 119000-127500 depending on which LTV I go for.

The following mortgages are ones I thought might be good:

Nationwide 5 year fix
4.29%
30% deposit
495 fees
300 valuation

Yorkshire BS 5 year fix
3.99%
25% deposit
995 fees
300 valuation

ING 5 year fix
4.69%
25% deposit
0 fees
0 valuation

I believe the YBS one works out the best by just over £1,000 over 5 years if you consider the equity/remaining debt rather than total amount paid. However my broker does not deal with YBS, so that's a bummer.

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However there are some 2 or 3 year fixes which would be considerably cheaper but riskier? What do you think?

Santander 2 year fix
2.89%
25% deposit
995 fees - 250 cashback
0 valuation
(SVR is 4.25% after the fix)

ING 2 year fix
3.45%
25% deposit
0 fees
130 valuation
(SVR is 3.5% after the fix)

ING 3 year fix
3.95%
25% deposit
0 fees
130 valuation
(SVR is 3.5% after the fix)




I have calculated that if interest rates stay the same and I can get the same mortgage deals in 2/3 years time, then the difference between the ING 5 yr fix and the ING 2 or 3 yr fix followed by another 2/3 years would be somewhere between £4k and £5k. So I could potentially save a lot of money, but I think the chances of IRs going nowhere in 2/3 years time is slim?

If I take out a 2 year fix and within that time a 3 year fix has risen to 5.5% (up by 1.5%) within the 2 year period or I take out a 3 year fix and within that time a 2 year fix has risen to 5.5% (up by 2.5%) within that 3 years - then the 5 year fix begins to have been better value overall.

I guess it all comes down to what interest rates do?? Personally I thought they would head up last year, shows how wrong I was then.
Any input would be appreciated.

Daniel_gecko

Nobody has any opinions?

The_Palmist

Hi Daniel, I am nowhere near an expert but I think you should go for a fee free tracker with freedom to switch whenever. For example, HSBC are currently offering a fee free life term tracker at 2.99 % [2.49 over BOE]. There's no early repayment charge and you can move whenever. This way you will make some use of current low interests. HSBC also guarantees that if you take up this product, they will have a fee free fixed available for your till Dec 2012.

If I was you I would go for this fee free tracker, make as much extra payments as I could and switch when rates begin to rise. Any savings in interest from a 4%+ fixed interest deal could go towards early payments.

If you must go for a fixed then YBS deal is probably the best.

The_Palmist

Also I have noticed that YBS variable rate is considerably higher than other banks, so you will end up paying more interest now and even more after 5 years.

Go for a tracker. HSBC deal is only till 26 June I believe.