1.9%!! Are the lenders panicking?

Cardinal-Red

I've seen some lenders (C&G but presumably as part of Lloyds TSB) are offering a 5 year 'fix' with first year at 1.9%. I calculated that on the property I'd like to buy, the mortgage jumps up by £350 a month at the end of the 1.9% first year at 1.9%.

Is this a ploy by the lenders to 'persuade' people that they can buy now? Even though the fixed rate that it goes up to isn't that high, (sub 6%) there's a growing nerviness in the market and perhaps the lenders are trying to get people to overcome those nerves?

roswell

Sounds a lot like the arm mortgages in America Google it and you will see the problem that arrises, its just liek those car finance Baloon repayments just a bigger scale, you only pay off 1.9% buy you still get charged 6 & its just added to teh end of the mortgage, A bit like using a 0% balance transfer card then going shopping on it.

Cardinal-Red

I forgot to mention the £999 fee also!!!

talksalot81

There is more of a trick than you initially realise. The deal is indeed good and the rate is indeed real. The problem is the length of time you are tied in. With many of the fixed rate deals or good deals in general, you will find that you can renegotiate at the end of the fixed or discount term. This means you can basically arrange another good deal without ever having to put up with the SVR. The cited deals will often have a significant overhang - so the deal may well last for 2 years however you may then be forced to pay SVR for several years before you would be able to renegotiate without penalty.

In summary, it seems too good to be true and it is too good to be true!

Cardinal-Red

Talksalot,

It's not quite so bad as that.

The 1.99% lasts until 29th February 2008, then it's 5.99% until 29th February 2012; when all the ERCs finish as well.

meanmachine_2

It's called a stepper.

Incredibly common.

Many banks have them.

They're for the financially !!!!!! and should never, i repeat, NEVER be bought.

You're locked into a stupid rate that often carries a punitive ERC.

Cardinal-Red

I'd like to stress that I'm absolutely not considering going for this offer, but to be honest the ERCs don't seem that bad! 7% in year 1, going down to 3% at the end of year 5 - with 10% of outstanding capital repayable without charge in each year....

UK007BullDog

Buyer beware.

Stepped mortgages are evil.

meanmachine_2

I see the Halifax has one too.

With a p*ss-taking arrangement fee of £1999!!!!!!

Not so long ago that would have been enough for a deposit!

Crazy market.

Beware headline-grabbing rates.

Curious_Moose

With a fixed rate mortgage, just shove all the variables (monthly repayment, arranement fee, booking fee, valualtion fee, legal fees...) into a spreadsheet and its easy to compare. Tweak a bit for money paid at the start or end of the term and Bobs your uncle.