Mortgage fixed rate ended - advice please...

thenap80

Hello Helpers!

My fixed rate mortgage with Santander has now ended. It was a two year at 5.4%. It has now moved to the SVR which I am told is 4.24%. This is better than it was which pleases me!!

I do not have a good knowledge of mortgages so am asking people for advice given the following math and therefore whether it is worth me swapping mortgage...

I have 45,000 left to pay on mortgage.
I am hoping to pay about 2,000 a month towards the mortgage.
I have 20,000 in an ISA

I was probably going to leave the ISA money alone thinking of the long term unless people advised to use it to whack onto the mortgage instead.

I have seen a HSBC fee-free mortgage being advertised in paper which is a lifetime tracker which currently shows 2.4 % APR. https://mortgages.hsbc.co.uk/product/A001001730001001731001001732-lifetime-tracker-special

This seems a bit too good to be true since I telephoned Santander to see what they could offer me as a swap but they could not even beat the SVR I am currently on!

Can someone advise please. I am very grateful.

TrickyDicky101

At your projected rate of payment you only have 2 years left on your mortgage and approx £2k or thereabouts of interest to pay. If you could move on to the HSBC tracker there would be some benefit but it is limited by the short remaining term. It would also be a hassle and if there were any fees involved eg a valuation fee/solicitors costs you may well find the benefits disappear. I, personally, would stick on the SVR.

thenap80

The HSBC one though is advertised as a fee free one. Zero fee it is called. But Yes, I am a little worried that there may be some hidden cost. Not sure.

I guess 4.24% is okay given that my mortgage is relatively low.

Thanks

originalmiscellany

If you want to, you could get a First Direct offset - I think currently at 2.49% - better still, and very low costs I think.
You have a chunk of savings in your ISA, which you could offset as well - that could be an ideal scenario

thenap80

Unfortunately I have a 49k loan from gorverment on some key worker scheme which for some reason allows me not to join first directs offset or the one account's alternative. Otherwise yes that would be ideal. I am looking at this HSBC one but cant tell if it REALLY is zero fee!!! ANy ideas?

Thanks so much

RenovationMan

How likely is it that you will be able to maintain the £2k per month overpayments? What are your ISA savings for and is their return exceeding your mortgage rate?

If you are pretty sure that you can sustain the £2k pm OPs and the ISA is just a rainy day fund rather than retirement or other specific long-term savings plan (and it receives less interest than you are paying on the mortgage) then I personally would reamin on SVR and pay £15k off the mortgage right now with the ISAs, leaving £5k for emergencies and then blitz the mortgage with the £2k per month and any other bits and bobs of cash that I had left.

When you are on SVR there are no limits on overpayments, which is often no the case for other mortgage deals.

thenap80

ISA rate is about 3% I think. I only thought of leaving it in there because its taken a while to build up due to limits and dont want my spare cash after mortage just laying in a low interest account.

But yeah, 2k a month every month should be regular.

RenovationMan

If your mortgage rate is 4.24% and your ISA rate is 3% then you are losing 1.24% in interest each year, which on £20k amounts to £248.

If you like having a large sum of money accessible in an account then you might be better off with an offset mortgage. This is where your overpayments reduce your mortgage balance and yet the savings are still accessible.

If, however, you are more motivated by reducing debt then you should pay your ISA money onto the mortgage and then blitz it until it doesn't exist.

Even at £2k per month you will spending a few years on this plan so you need to decide what your motivations are and then go for it. Certainly there seems little point in keeping £20k in an account that pays much less than what it costs to maintain your mortgage.

sj1147

thenap80 wrote: »

Unfortunately I have a 49k loan from gorverment on some key worker scheme which for some reason allows me not to join first directs offset or the one account's alternative. Otherwise yes that would be ideal. I am looking at this HSBC one but cant tell if it REALLY is zero fee!!! ANy ideas?

Thanks so much

Hi I have just applied for the HSBC fee free, there are no fees, no valuation cost on the basic one and no exit fees. It is fee free.

getmore4less

I think you need a longer term plan once mortgage free you will have in exccess of the ISA allowance each year so need to think about that.

ISA tax free status is forever (for now) so you have the long term benifits of using up the allownce ove paying off the mortgage.

Moving to HSBC will be cheaper anyway so worth doing if really free.

Lifes_Grand_Plan

Just about to move to the HSBC fee-free tracker myself (admittedly from a HSBC fixed rate) and yes it really is fee-free....

If I was you, i'd do what renovation man suggested and pay £15k off the mortgage, keep £5 for emergency and then move to HSBC on the tracker for the much better rate, whack £2k off the mortgage each month and in no time you'll be mortgage free.