MSE News: Mortgage rates at record low, and they may drop further

Consumerist

Thrugelmir wrote: »

On basis of 25 year total term, fees added to mortgage,
Mortgage A - total repayments £23,218
Mortgage B - total repayments £24,150
So B more expensive by £932

I looked at that option but realised that the repayments included an element, be it ever so small, of capital repayment, not just interest and charges.

Edit
I'm open to argument on this one. We seem, however, to agree on which option is the better.

Thrugelmir

Consumerist wrote: »

Edit
I'm open to argument on this one. We seem, however, to agree on which option is the better.

What's the follow on interest rate?

Consumerist

Thrugelmir wrote: »

What's the follow on interest rate?

The scenarios assumed that the two-year option would be still available after the first two-year deal had expired. Not a likely scenario but a theoretical one. So the follow-on rate (after year 2) for Mortgage A would be the same 3.0% as for the first two years.

Hope I understood your question correctly.

Pincher

It's the good old Buy to Let proposition:

5% yield with 2% interest

If some idiot will lend you the money, it's a money spinner again.

rickbonar

Fill your boots if they're so low.........

Thrugelmir

Consumerist wrote: »

Hope I understood your question correctly.

You did,

The correct deal depends on the amount borrowed. The higher the amount borrowed then more fee and lower interest. Obviously vica versa for a smaller amount.

JimmyTheWig

Consumerist wrote: »

The problem, I think, with comparing these two deals in any meaningful way is that the APR would depend on how much you were borrowing. i.e. how large the fee is compared to the size of the loan.

Yes, but that's true in many circumstances.
The APR for the 25 year term is quoted and includes the fixed fees and the interest payments. This, too, then is dependent on the size of the loan.

Consumerist wrote: »

Perhaps comparing the total costs over the 4-year period may be more useful

In this instance, yes, comparing the total cost over the 4-year period would be equally useful to comparing the APR over the deal periods.
But that's only because I've used simple examples. What if you also wanted to compare mortgage C where the deal lasted 3 years and 9 months? Would you expect a borrower to compare the total costs over a 60 year period (I believe 60 is the LCM of 2, 3.75 and 4) where you take mortgage A 30 times, mortgage B 15 times and mortgage C 16 times?

Yes, that might be a comparison I might do, but someone less nerdy would be happier just given the answer in the form of the "APR of the deal".

roddydogs

The headline should read "Savers once again punished for saving!"

madmonkey01

i am with mortgage express, in negative equity, so i have a high(ish) variable interest rate. no escape for me currently.

Gorgeous_George

Some time ago I created a spreadsheet to compare mortgage costs.

If the mortgages being compared are equal lengths, an accurate answer is produced. If they are different lengths tehn the user needs to estimate the ongoing mortgage rate when the shorter term deal ends and this introduces potential errors.

Short term deals are usually less expensive but provide the least security. I wouldn't consider fixing for less than 5 years and would compare a 2 year fix to available SVRs.

Spreadsheet available on request.

GG