Halifax Homeowner Variable Rate

astrata

I have a month to run on my Halifax fixed rate. I do not want to change lenders.

I have two options - do nothing and go on their SVR of 3.5% or (from the deals offered) I could fix for 2 yrs at 3.49% (ie virtually the same) with no product fee. I appreciate there is an early redemption fee & overpaymnts are limited to 10% (both these conditions are fine).

The down side of the fixed rate is that after the 2 yrs I would go on to the Homeowner Variable Rate not SVR. The HVR is currently 3.99% and it is of course variable so the difference between it and SVR could increase.

I have 15+ years to go on the mortgage although hope to reduce this with moderate overpaymnts.

Obviously any fixed rate is a gamble. Most people say interest rates will remain unchanged next year so if they increase in 2013 I would benefit I am just unsure about commiting to the HVR (although of course I could just look for a further deal in 2 yrs).

Any comments would be appreciated.

Thrugelmir

The downside of leaving the SVR is that you are unlikely to obtain this rate again. The differential to the HVR could remain in place for many years.

Have you considered maintaining your repayments at their current level when moving onto the SVR?

As at least by reducing the capital balance this will improve your LTV. Thereby meaning that you will have options with other lenders as well.

Meeper

If you take the fixed rate, you are gambling that interest rates will rise, and you will be safe from said rises (at least in the short-term). If you do not, you are gambling that they will not rise.

Either way, there is risk involved, and you should largely forget about the actual numbers and concentrate on getting the structure which is most appropriate for your circumstances.

John424

Seems to me that you want the security of a fix rate, Halifax fixed rates are terrible comparatively at the moment. I am moving from Halifax to NR for a 3 year fix with 25% equity for 3.19%, halifax did not even get close to that. I appreciate that NR SVR is much higher than Halifax's 3.5% but I will probably move my mortgage on again to another lender after 3 years than suffer a high SVR so the SVR and HVR factor very little in my thinking currently.

astrata

Thanks for your replies, at present I pay 2.99%. Thanks to overpayments even paying 3.5% my repayments will actually drop slightly. I will continue to overpay (I have kept my payments at the same amount for the past few years as rates have gone down). My LTV is about 60%. I have dis-counted moving lenders due to the hassle but also as the current high product fees outway the amount I would save.

I am trying to reduce the term of the mortgage by overpaying each month with the hope of paying in 10yrs or so. As well as overpaying its of course important to get the best rate. The fixed rate may, if interest rates rise in 2013, save me money for a year. It just reduces my options slightly at the end as the HVR rate (rather than SVR) is likely to be higher but of course I could look for a new deal or switch lenders at that time.

The no cost option of fixing at 3.49% for 2 years is very tempting and may of course not be available if I stay on SVR for now and reapply say in 6 months.

The other alternative is a no cost 3 yr fix at 3.94% but I don't like the idea of paying more than necessary now in the hope that in a year or two rates will be much higher.

hunt85

I am in a similar position choosing between halifax 3.50% SVR or going into a fixed rate but our offer is 4.50% with a £999 fee as we don't have much equity since 2 years ago when we took the fixed rate out we were first time buyers. I did not know that halifax had since changed the SVR to call it the "Homeowner variable rate" and that is 3.99%. Can they not increase the SVR & the Homeowner variable rate whenever they like? if rates go up these would both increase anyway, so to avoid that and since the rate is basically the same in your case I would fix in - wish we had that offer!

astrata

Apparently any Halifax customer that goes on to a fix rate will now automatically go on to the HVR once it ends. If interest rates go up then both HVR and SVR are likely to increase and there's no guarantee that 0.5% difference will remain in place. I am not sure but I think Halifax terms & conditions stated that SVR could be no more than 3% higher than base rate - so this is why the HVR was created (without this guarantee) and getting people on to HVR is likely to give them more control over the interest rate they can charge.

I appeciate Hunt85 comments and on balance 2yrs at 3.5% guaranteed is probably best as the difference between the HVR rate & SVR at the end is likely to be small and I can always look for a new deal.

Thrugelmir

astrata wrote: »

I appeciate Hunt85 comments and on balance 2yrs at 3.5% guaranteed is probably best as the difference between the HVR rate & SVR at the end is likely to be small and I can always look for a new deal.

One thing to bear in mind that average SVR across all lenders is now around 4.85%. This average is distorted by the very low 2% above base afforded to both old Lloyds and Nationwide borrowers. Yorkshire Building Society offer some attractive mortgage deals but their follow on SVR is now 4.79%. So don't assume that remortgaging constantly will offer you a saving. As your mortgage balance reduces, the cost of product fees and legal fees in switching lenders will be harder and harder to cover.

astrata

I think the Halifax are stuck with an SVR at 3% above BR so that is why the HVR has been introduced. The risk is that HVR will increase to be more in line with the average above. I think that figure is slightly skewed not only by the v low lloyds rate but also be the very high rates smaller building societies are charging (probably to increase their assets in these difficult times) so its more likely to be in line with what their main rivals charge.

I thinks its a good point that as my balance reduces switching lenders will not be an option - to be honest this is the case at the moment a £1200 fee to save less than 1% will cost me more than staying at what I have.

Although there are no guarantees I will get my mortgage calculator spreadsheet out and try some different rates. As you pay interest on interest there would be a long term saving if for example for 12 months I paid 0.5% less than I would have otherwise done.