Mortgate - low rate for 2 yrs or lifetime tracker?

benskiddle

Hi
I'm looking for a mortgage at 80% LTV.

I've found a good deal at 2.5% (discount mortgage), but after 2 years this springs up to around 5.5%

Alternatively I've found another deal through HSBC which is a lifetime tracker at 2.5% above base, so currently 2.99% (no exit fees, no min tie in)

Over the 2 years, the 2.5% deal will work out cheaper, even with slightly higher fees, however what worries me is that after 2 years we will need to remortgage, and if the value of our property has gone down, we may not be able to get the 80% LTV deals any more, hence having to remortgage to a higher interest deal.

So would it be best to go for the lower rate now, or a slightly higher rate which we can stick with for longer without the 2 year deadline looming?

The HSBC mortgage isn't available through our broker either so we'd need to go solo on that.

Many thanks

gemma.zhang

I will get life time Tracker. 2 yr is shorttime, and u mugh not find boe rate change much given the Market we are now. This is if you are comfortable with potential increase in boe rate.

rising_from_the_ashes

Is there a tie in period / penalty fee at the end of the 2 year period?

I'm basically in the same situation - and everyone is different - but the 2 year one I looked at had an exit fee and it also wasn't portable so I went with the 5 year one.

ETA - also means I can fix without penalty if the rates start to rise

MFSaver

OP, have a look at YBS tracker to fixed for 85% LTV. 2.49 % + BoE rate tracker for 2 years and 4.09% fixed for 3 years. This might be suitable if you want the security of having an additional fixed term beyond the 2 years. If you can somehow lower your LTV to 75%, they have a 1.79% +BoE rate tracker for 2 years and 3.39% fixed for 3 years.

whatyadoinsucka

looked at hsbc yesterday and it was 2.1% plus base. on the lifetime tracker (possibly 70% ltv though). i struck lucky and have since wiped 1/6th off my mortgage in the last 2 years.

the base rate isn't going to move for some time, so i'd take a little extra risk for the bigger reward, will you be paying the max you can afford, or will you be able to make overpayments (unlimited)
i took out a longer mortgage 30 years, to ensure the lowest figure but then overpay more than double

just remember when you come out the rates will have changed, assume the base rate is 2% in 2 years time, the best rate you can fix is then much higher ie 4.5%.

short fixes in my opinion are a waste of time, i will stick to variable until i see a good 5 year fix if i start to get jittery about the economy recovering. not that it will anytime soon lol

benskiddle

The 2.5 % deal is a Mansfield BS: 3.09% off SVR which currently equals 2.5% After 2 years this reverts to SVR which is 5.59%. Early redemption is 2% within the 2 year term.

In comparison the HSBC mortgage is 2.49% + BoE rate tracker for life. No extended tie in or redemption fees.

While the Mansfield deal seems better due to the lower rate, what scares me is that beceuae this is our first mortgage on a new house, if house prices drop by say 5%, we'll not have paid much of the capital off and therefore will have dipped below our current 80% LTV and when we remortgage will be stuck getting a worse deal. If they dipped by more than that (lots of news articles predicting 10-20% drops!) it could mean a difficult remortgage in 2 years. HSBC mortgage is higher but we could stick with it for say 5 years if the prices dropped a lot until they picked up a bit more. We are planning to stay in this house for 10-15 years.

rising_from_the_ashes

whatyadoinsucka wrote: »

i took out a longer mortgage 30 years, to ensure the lowest figure but then overpay

That's what I've done too - the new mortgage is also about £100/month less than my current one so that money will be going to it as overpayments while the rates are so low.

I am learning so much on here:D, it would never have occurred to me to do that before .....

benskiddle

Yes we are planning on doing that. Mortgage over 30 years or even 35 to get a low min payment but then overpay as if we're on a say 25 yr mortgage. We can do this on both the mortgages above, they both allow overpayments up to 10% of loan remaining.

So, discount mortgage over 2 years then be forced to remortgage, when in reality interest rates will probably be the same but house prices lower (ie we lose out) or stick to a higher % rate tracker which is a lifetime deal with no tie in and not be forced to remortgage in 2 years?

whatyadoinsucka

forgot to mention for hsbc you have to be clean, as they have a tough lending criteria.
bank statements 6 months, 3 months pay slips, all loan / debt. if you have defaulted or got negatives on your credit history, you may get rejected. and only approach on sensible lending requirements. (ie under 3x salary, 2.5 joint)

be open and honest

benskiddle

Thanks guys

We went for the lifetime tracker, currently at 2.99%. Seemed to be the better option rather than having to remortgage after 2 years when the interest rates aren't looking likely to move in that time. We can also exit at any time and remortgage to a fixed rate if we need to

Applied with HSBC and despite all the horror stories about being declined and poor service, I have to say the service was excellent. Went into branch, sat down for an hour and a half with an advisor who was very thorough, she sent the details off to the underwriters and we were approved 5 days later. I had 2 (old and satisfied) defaults on my credit report but didn't cause any issues at all.