Fixed Rate ends Sept- what deal now?

davidscot

Right the penny is dropping here I think. Im getting to understand what you mean.
As to mortgage, as I said in original post here its got roughly 13 years to go and it will be roughly 40% of LTV of around £66k-ish (will have to check the paperwork)

JimmyTheWig

davidscot wrote: »

So let me clear things up hopefully here:o If I just let the deal end in Sept I move to base rate +2%- yes? So I can then overpay with any excess cash -yes? If rates suddenly rise I can then just move asap onto a tracker/fixed rate deal -yes?
Hopefully someone can clear this up for me here:D

The only thing I'd add is that if rates suddenly rise then any available tracker/fixed rates will rise, too.
But I certainly don't think that that should interfere with the logic here. It's such a good rate that is almost bound to stay good (enough) for the next year or so.

getmore4less

davidscot wrote: »

Right the penny is dropping here I think. Im getting to understand what you mean.
As to mortgage, as I said in original post here its got roughly 13 years to go and it will be roughly 40% of LTV of around £66k-ish (will have to check the paperwork)

There are a few trackers around that are better than base+2% so they may be worth a look if fees stack up.

The key to the alternatives to fixing is the overpayments/savings if you have a lower rate the buffer they create reduces the impact of rises.

soozonholiday

Another query. In case I want to keep some of my savings handy for a rainy day and am not forced to borrow can I clarify the overpayments versus savings issue. Am I better off with a savings rate that delivers more than 2.5% i.e. higher than my mortgage interest rate? Or does the snowball effect negate this if I overpay my mortgage?

Just trying to strike a balance here between paying off my mortgage earlier versus having some ready cash and not sure if comparing mortgage v savings interest rates is a fair comparison. Any clarification gratefully received!

Tabatha_Kitten

Guys, dont forget that if you build up an overpayment pot Nationwide will allow you to use it take a payment holiday should the need arise.

JimmyTheWig

soozonholiday wrote: »

Another query. In case I want to keep some of my savings handy for a rainy day and am not forced to borrow can I clarify the overpayments versus savings issue. Am I better off with a savings rate that delivers more than 2.5% i.e. higher than my mortgage interest rate? Or does the snowball effect negate this if I overpay my mortgage?

Just trying to strike a balance here between paying off my mortgage earlier versus having some ready cash and not sure if comparing mortgage v savings interest rates is a fair comparison. Any clarification gratefully received!

This is a difficult one that is more psychological than mathematical.

If your savings consistently return better interest than you are paying on your mortgage, then paying into your savings is better mathematically. The snowball effect acheived by overpaying your mortgage is exactly the same as the compound interest you will earn on your savings.
Note that this means that you cannot see interest earned on these savings as money to spend - it is money that is as much in your mortgage pot as the original overpayments that went into your savings account.

But the real psychological bit is hinted at in your post. Imagine you've been paying £200 a month into savings as mortgage overpayments, earning 3% interest. After two years you'll have £4944 in there.
You decide that your car is getting a bit old. You deserve a new one. You've got the money in savings to buy a new one, so blow the lot on a car one rainy day.
While this is much better mathematically than having to borrow the money at personal loan interest rates if you needed a car, you have to weigh this up against the temptation of spending the money when you didn't really need to. If you didn't have the money in savings, would you have bought a new car? If not then you shouldn't use that money in savings to do so.
If you don't think that you'd have the willpower to make that decission (or if, for example, the savings sitting there will cause friction with a partner) then you're better off overpaying the mortgage and you won't be tempted to waste the money you've worked so hard to save.

getmore4less

Tabatha_Kitten wrote: »

Guys, dont forget that if you build up an overpayment pot Nationwide will allow you to use it take a payment holiday should the need arise.

Depends when you took out the mortgage, can be another reason not to remortgage because you lose the facility.

As an existing Nationwide mortgage customer, please be aware of the following:
Any mortgage products reserved on or before 29th April 2009 will revert to the Base Mortgage Rate (BMR). If you choose to switch to a new Nationwide mortgage product, the new product will currently revert onto our Standard Mortgage Rate (SMR).
Both are variable rates which we may vary in accordance with our mortgage terms and conditions. However, the BMR is guaranteed to be no more than 2% above the Bank of England Base Rate, whilst the SMR has no upper limit or cap. If you choose to switch to a new product, it is not possible to switch back to the BMR at a later date.
Please note that all mortgages reserved on or before 3rd March 2010 include the option to apply for a payment holiday and borrow back facility. Any mortgages reserved after this date will no longer include these facilities.

getmore4less

soozonholiday wrote: »

Another query. In case I want to keep some of my savings handy for a rainy day and am not forced to borrow can I clarify the overpayments versus savings issue. Am I better off with a savings rate that delivers more than 2.5% i.e. higher than my mortgage interest rate? Or does the snowball effect negate this if I overpay my mortgage?

Just trying to strike a balance here between paying off my mortgage earlier versus having some ready cash and not sure if comparing mortgage v savings interest rates is a fair comparison. Any clarification gratefully received!

Don't forget the tax on savings.

Personaly I think that savings(if rates good enough) are the way to go more flexability as long as you keep an eye, also worth consdiering building up cash ISA's the tax benifit lasts longer than most mortgages.

squiggleb

If u log in to the switcher on the NW website it will tell you for definite which rate your account will revert to if you do not take a deal (SMR or BMR) and what the monthly payment would be at the moment for that as soon as you log in. I only really noticed that when i logged on to switch mine to the 5yr fixed... I am now leaving it to go to the BMR.

davidscot

squiggleb wrote: »

If u log in to the switcher on the NW website it will tell you for definite which rate your account will revert to if you do not take a deal (SMR or BMR) and what the monthly payment would be at the moment for that as soon as you log in. I only really noticed that when i logged on to switch mine to the 5yr fixed... I am now leaving it to go to the BMR.

Used the switcher option as advised,now even more confused.
Currently on fixed at 5.78% paying £545 and if I just stay and move onto BMR at 2.5% will pay £435. Is it my maths but I thought if I moved onto a rate less than half of what on currently then monthly payments should have been halved?