Best options?!

KDUK

Good morning folks,

Long time lurker, first time register-er and poster!

Am in the process of buying a house, and wondered what the considered opinions of the forum might be.

We are in a fortunate position following a previous house sale, of having a 25% deposit.

I also have a previous mortgage - 0.69 above base, for term, that is portable which we can use for part of the borrowing. This is with C&G.

My dilemma is thus.

With C&G, my previous mortgage coupled with their best 2 year fixed (3.39) put the repayments at circa £2040.

However, I could ditch my previous mortgage and get a 3 year fixed at 2.99 that also puts the payments at circa £2040.

Or, I could even get a 5 year fixed at 3.59 putting the payments at a higher £2190.

These appear to be the best deals I can see at the moment.

I'm torn between the C&G option which keeps the excellent rate for part of the borrowing but only gives me partial price certainty for 2 years, versus ditching it all and getting full price certainty for 3 years.

Given I don't expect rates to change (much) for a good 12-18 months, I'm in a bit of a quandry.

My concern with the C&G option is that I'm coming out of a deal just when rates are on the up, and getting a new deal will ramp up the payments.

But who's to say that won't be the case in 3 years!

Any thoughts or advice welcome, thanks!!

Thrugelmir

You need to consider what the interest rate will be once the fixed product term ends. As the the ongoing SVR will be much higher. In order to make a comparison.

KDUK

Well yes.

The BoE predictions say they are not expecting much movement until as late at 2016 when it will reach perhaps 1%.

But that is (a) just a prediction and (b) a long time out and (c) lots of things can change in that period. Just look at where we were in 2008, and then 2004 before it.

I would also be looking to remortgage at the appropriate time at the end of whatever deal, and not go onto the SVR unless it was particularly attractive - unlikely but not unheard of.

Price certainty for 3 years appeals it has to be said.

But having a fairly decent chunk of borrowing at such a low rate, if we paid off the larger mortgage element at a faster rate, we'd potentially be better off.

Tough decision!!

Thrugelmir

KDUK wrote: »

The BoE predictions say they are not expecting much movement until as late at 2016 when it will reach perhaps 1%.

BOE base is now detached from current lending rates. As the financial crisis comes to resolution. Then the market will determine the level of interest rates. More than likely higher than currently they are.

Rates have now being edging up since last September. As each lender in turn moves a fractional point upwards here and there.

The BOE's function currently is to maintain stability within the banking sector. Where issues are far from resolved.

KDUK

Thrugelmir wrote: »

BOE base is now detached from current lending rates. As the financial crisis comes to resolution. Then the market will determine the level of interest rates. More than likely higher than currently they are.

Rates have now being edging up since last September. As each lender in turn moves a fractional point upwards here and there.

The BOE's function currently is to maintain stability within the banking sector. Where issues are far from resolved.

Interesting.

Although a tracker rate still - by definition - tracks to the BoE rate whatever it is.

I am thinking that getting security for 3 years might not be the worst thing in the world.

Although losing £100k of borrowing at 1.19% (currently) just doesn't sit that comfortably with me! Even if 3 times that will have to be borrowed at 3.39 (fixed for 2 years) to keep it.

Thrugelmir

KDUK wrote: »

Interesting.

Although a tracker rate still - by definition - tracks to the BoE rate whatever it is.

I am thinking that getting security for 3 years might not be the worst thing in the world.

Although losing £100k of borrowing at 1.19% (currently) just doesn't sit that comfortably with me! Even if 3 times that will have to be borrowed at 3.39 (fixed for 2 years) to keep it.

C&G's Homeowner rate is currently 3.99%. So that's the minimum rate you'll be paying at the end of the fixed product term.

If your .69% above base is a lifetime rate. You'll be foolish to throw it away.