Which Mortgage from these two and advice on discount v tracker

rjenk74

Hi all, I have found a property and now sorting a mortgage, had an advisor out and checked though his Database but to be honest what I found myself on comparison sites were better (cheaper) but just needed some advice.

Details:
Salary - £41,000
Debt/Loans - 0
Child maintenance - £250 per month
Cash/Potential Deposit – £30,000
House cost - £140,000
Renting but not a first time buyer.

I notice there wasn’t much difference between a 20% or 15% deposit, which his £28,000 or £21,000 deposit. Considering my cash situation and the extra cost involved with buying (stamp duty, solicitor/mortgage fees etc), I decided the 20% deposit was pushing it and so though would be better to go for a lower (£21,000) deposit and thus have cash spare for emergencies or other investments.

I decide to go for a variable (discount or tracker) and over 2 years came out by far the best:

Loughborough 2yr Discount 85
Initial Rate 2.99%
APR 4.70%
Max LTV 85%
Actual Cost Over 2 Years £15,374.96
Monthly Repayments £566.04
Scheme Duration 2 years
Lender's Base Rate 4.99%
Valuation Fee £190.00
Booking Fee £0
Arrangement Fee £495.00


Yorkshire BS Tracker 2yr 85
Initial Rate 3.19%
APR 4.70%
Max LTV 85%
Actual Cost Over 2 Years £15,980.24
Monthly Repayments £580.01
Scheme Duration To June 2014
Lender's Base Rate 4.99%
Valuation Fee £265.00
Booking Fee £195.00
Arrangement Fee £800.00


The Loughborough discount follows their own base rate and the Yorkshire tracker follows the BoE. On paper it seems the Loughborough one is better as quite simply its cheaper however a couple of questions I have are:
- Is it likely the Loughborough could raise their base rate before the interest rates get raised and thus that mortgage would increase before Yorkshires would? As it appears other banks have done this of late but maybe they were lower in the first place.
- Is it possible that even when the interest rates raise in future, Loughborough my not actually follow suit with their base rate as they want to get it back to being closer to the BoE rate as I know some lenders have promised to work like this.
- In general what are peoples experience of these two lenders
- Has anyone any thoughts on better mortgages that I may have missed on the comparison sites?
- How come the mortgage man I saw (whole market) could not find anything cheaper than what I could find, as I assumed some of a brokers ‘exclusives’ would be cheaper, however appears not, so is this getting more common?

I have got another mortgage advisor to see (recommended by a friend) who again is not tied so will see what he comes up with but if he uses the same data as the first one I wonder if he will

Anyway sorry for the long winded post, any advice much appreciated

Regards
Rich

harvey115

If you are really after 2 years fix then I would go for the BoE Tracker rate rather then a discount from the SVR.

Personally I believe the BS/Bank can increase their SVR any time no matter if the BoE base rate rises or not. However if you look the other side if the BoE rises I think majority of the Banks/BS would increase their SVR as well.

If I were you I would not just look at the 2 years fixed as for the next 2 years we are not expecting huge changes to happen. If someone is going for a fix I would go for 5 years at least. Otherwise I think a tracker (BoE) rate after the fix would be better as well.

rjenk74

Hi harvey115

Thanks for the reply, but no I am not going for a fix, but a tracker or discount hence the shorter time. If I was to fix then absolutely would fix for much longer.

Yes you are quite right the banks can raise their rates at any time, and that was why I questioned the ‘risk’ of going for the cheaper discount as opposed to the more expensive tracker. Seems they are both priced in such a way as to makes the decision a little more difficult. If they were the same then I would go for the tracker, but it’s tempting to take the risk and go for the discount and hope they don’t raise (if they do) their base until into the second year so overall for the 2 years period I am still better off.

Pfft, never straight forward is it J

Regards
Rich

harvey115

Okay the difference is very small but it is still some money:

With 2.99% SVR discounted rate:

- Monthly payment = £563.7
If the rate jumps 1% = 3.99%
- Monthly payment = £627.5

The rate may rise any time but it wont be in very quick successions if it has risen a couple of months ago. So the difference would be less. In worse case say the rate jumps 1% from the day you get this mortgage you would be around £1,500 worse off in 2 years. So the later the rate changes the less you lose.

With 3.19% BoE tracker rate:

- Monthly payment = £576.2
If the rate jumps 1% = 4.19%
- Monthly payment = £695

However BoE base rate has less chances of rising (personal opinion). So comparing the difference with the other deal would be better.

If you compare the two deals without any shift in rates you are around £300 better of with 2.99% rate as compared to the BoE tracker rate.

Personally I would go for BoE tracker for 2 years if these are the only options available. Since the difference is only £300 for the period and chances of movement are less. It seems like if the SVR moves slightly say half way the 2 year period both the deals might almost be equal.

Hope this helps.

getmore4less

do a like for like to get the true costs of the differnce.

mortgage + fees, same monthly payment, amount owing in 2 years