End of fixed rate deal

accountingbod

Hi all

My fixed rate with RBS is coming to an end at the end of May - tomorrow!
We have just managed to scrape enough in the last couple of weeks to overpay to get in to the 75% ltv range - hence why we have not yet secured a new deal.
I Dont mind staying with RBS and was looking to go on to a 5 year fixed at 4.19% which leaves our payments around the same as what they are now.
With all the news about interest rates recently i am wondering if a two year tracker at 3.19% is a better route? It leaves enough exposure for a 1% rise before it becomes more expensive for the 5 year fixed.
The property is a flat we are renting out by the way so the 5 year fixed seemed attractive for security but i cant ignore the £70 payment difference between the two. If we remained on the same repayment we would overpay an additional £1,680 in the two years.

My head is hurting and i am also nor sure how to weigh up the risk of having to take out a new product in two years with possible inflated rates against a secured 5 year deal. Obviously no-one wants to feel mugged by a fixed when rates are low.

The maximum exposure i would like is at about the rate we would pay on a 5 year fixed so rates would need to rise above an extra 1% for the tracker to hurt my pocket. I could also reduce the term on the mortgage from 28 years to 23 years simply by going on the tracker and paying the same amount each month but i dont think this is any different to being on a 28 year term and overpaying the same amount anyway?

Does this post make any sense? I have no idea but i am very confused and hoped some people would give their thoughts if they were in my position!

Thanks :rotfl:

accountingbod

And there was me thinking i had an answer to my post.... oh well... LOL!

hillcats

I trust you do realise that you don't have to change mortgage provider just because you are about to end the fixed rate period?
What is your existing rate that you have been paying, and what will you now be paying - the follow on rate?

zxspeccy

You’ve been very sensible “overpaying” your mortgage to get within the 75% LTV as this will get you a much better deal. As for what you should plump for then unfortunately it is very difficult to say, as even the experts don’t really know what is going to happen to base rates. Staying with the same lending would be easier (and less stressful) and potentially cheaper as other lenders may take charges for valuation, legal and security fees. Having said that I would still shop around to see what other deals are out there.

I changed to a five year fixed deal three years ago and worked out what I could comfortable afford to repay. I had easily afforded the repayments up to this point so opted to increase my repayments with the new deal which took four years of the total term of the mortgage. I didn’t overstretch myself either so I was still able to make a yearly overpayment of 10% (which I do in December).

My only concern would be that you are renting out the property, so I am hoping you are on a “buy to let” mortgage. You would also need to factor in the risk of renting, have you planned if the tenants stop paying or if the current tenants move out and you are struggling to get new tenants in. If you are on a standard mortgage then you could be on dodgy ground as the mortgage has been agreed for the purchased of you own main residence.

Good luck with hunting down a good mortgage deal.

accountingbod

Thanks for the response zx.
We are not on a buy to let mortgage but have a permission to let from RBS to rent the flat out on our current mortgage.
I think staying on the fixed rate would give the security for five years so we know where we stand each month although a two year fixed or two year variable would lend itself to a saving that although i thought i could overpay with initially may be better spent building up a larger pot for if the place was vacant as we are aiming to have a six month contingency which currently sits at around 2 months.

I am staying with RBS for ease and because their rates do not seems that bad in comparison to the market overall...

Just a decision that i need to make! A 2 year fixed at the moment makes the most sense probably as a reduction in the overall amount paid on the current term. It's a happy medium between the two i guess.
A friend who is a mortgage advisor/broker advised me that a fixed rate deal for 5 years below 4.5% is worth considering although he didnt really state why but im guessing it may be because a .5% rise in rates would push the SVR to 4.5% perhaps? This is why i am putting this consideration in the pot even though we would be better off on the SVR as it is currrently at 4%