To fix or not ? Only 7 years left

musketter

I am in the lucky position of only having about £15,000 left on my Mortgage. Property value £200,000.

On the 1st march (3 Months early) I can re-fix my Mortgage Rate for another period. I am currently fixed at 5.18% with Nationwide.

I am looking at 3 options with Nationwide, Over 7 years. As the amount is so low I do not really see the point in switching companies.

1, Base mortgage rate, Currently 2.5%, will rise in due course. (£194 P/M)

2, Fixed deal for 3 years @ 3.89% with £300 Cashback offer, (£204.27 P/M, No fee) Up to £500 overpayments P/M penalty free

3, Fixed deal for 5 years @ 4.09% with £300 Cashback offer, (£205.65 P/M, No fee) Up to £500 overpayments P/M penalty free

I have one other car loan which will be paid off in approx 20 months, costing £210 a month. Once this paid off I intend to over pay by £200 a month on the Mortgage.

I am leaning towards the 5 year fixed deal, but I have doubts whether I should just go onto the Base Rate. I am also worried that if I do let the fixed deals go I will end up paying more in the long run if/when the rates shoot up.

Thanks for any advice, Musketter

dimbo61

What you dont say is what you are paying now ?
If you move onto either of the 2 fixed rate deals you wont go onto the BMR at the end of fix!
Now if you take the 3 year deal then you have 4 years left.
You have the chance to cut your mortgage rate in HALF from 5.18% to 2.5% and I would overpay the mortgage as much as possible and try to clear the mortgage ASAP
Rates may well go up in the next 2/3 years but will they go up by 1.5% ( 3 year deal) and 2% ( 5 year deal)

musketter

Sorry, I missed that bit. I am currently paying £178 P/M with 10 years left. I am taking this chance to reduce the time down to 7 years. I am hoping with the overpayments I can get it down to approx 5/6 years.

Until the other loan is paid off in 20 months, I cannot overpay any more, I only earn 20k, and also have family commitments to pay for (Maintenance etc).

I make the difference in the rates 1.4% (3yr) and 1.6% (5yr) and although I believe they will keep them low for the next 18 months or so, who knows after that !

Joe_Bloggs

Don't change a thing. Just fall on to the 2.5% rate and make up your total payments to 194 per month with a modest overpayment.
This gives you the maximum flexibility with a seven year endpoint.
J_B.

dimbo61

Agree with Joe-bloggs I would drop onto the BMR and overpay whatever you can afford each month.
You are right the difference is 1.4% ( 3 years) and 1.6%( 5 years) but the bank of england base rate would need to rise by 1.5% or 2% before you would be better off on the long term fixes
Your Gamble ?? BOE base rate has been 0.5% for the last 3 years and hundreds of thousands of mortgage have been taken out since then !! now if the rate started to climb the housing market would slip into recession

northerner999

I agree with the suggestions to let it roll onto the SVR and wait for a bit. At the moment you have the luxury of time, and it seems daft to rush and tie yourself into an interest rate that's higher than what you're paying now.

There are parallels to my situation. I've been on the Halifax SVR for a while as I have been unsure if I am due a large (by my standards at least!) inheritance following the death of my godfather and wanted the option of paying off a big chunk of mortgage without any penalties. I've just let it roll and kept glancing over the best buy tables and read the money pages in the weekend papers. I'm no Mystic Meg, but believe if rates start to rise I'll be prepared to get what will still be a decent deal, and I'd be surprised if any higher interest in that time is more than I've saved by waiting.

I'd be inclined to leave it be for the time being. It may be worth putting any reduction in mortgage payments towards your other loan, to help pay that off a little bit quicker and get you focused solely on the mortgage. I had a £2K bank loan when I bought my flat and ploughed in payments to get rid of it around six months earl, was a great feeling.

shahgee

Dear musketter!! I'm throwing a novel idea to you. Why don't you re-mortgage, get the maximum equity out of your present property & buy a property on a buy to let basis? The equity in your property is too good to be there lying idle. How much loan you can get totally depends on your age, present income, passport & credit history. Do contact an independent mortgage broker like myself for more information?
Regards

musketter

Hi Folks, thanks for the replies.
The buy to let idea is a no go due to a illness, I really do not need the hassle.

I have been working it out over the 7 years, maximum period I want to take.

£15000 @

3.5% Average over the seven years (2.5% now, who knows what in the future) = £16884
4.1% Fixed for 5 yrs (Assuming it will stay at 4.1% after year 5, could be more) = £17274 with cash back offer -£300 (will be paid straight off mortgage)

So I make the difference after the cash back, to be £90, I am assuming the BMR will average of 3.5% over the 5 yrs, it will be the same after yr 5 for both

I am not in a position to make overpayments until I have cleared the other loan (which I am overpaying by £100 PM already @ 4.99%, approx 18/19 months left).

Is it worth risking the interest rates going up for £90 ? or is it better to fix it now before the rates go up ? I am still hoping to overpay for by £200 PM once the loan is paid, and pay the total amount off in around year 5/6.