End of Fixed Deal - What to do?

luke222010

Hi all,

Hoping I can get some advice from fellow moneysavers...

Coming to the end of our 3 year fixed mortgage deal with nationwide at the end of December, which we were paying at a rate of 5.89%, but it will revert to the SMR which is 3.99%. This is our first mortgage and the first three years of it, consequently this is the first time we've had to decide what to do when coming to the end of a fixed deal.

Being honest, i'm struggling to make a decision. Should we fix again on a fixed rate, or fix on a 2 year tracker? We need to switch on an 85% LTV and the best rates i've seen so far (based on mortgage comparison sites) are 3.49% 2 year tracker, and 3.79% 2 year fixed.

However, a friend at work, who borrowed at 100% LTV around 8 years ago, claims he is paying at 2.5% interest rate on a tracker and I'm wondering whether mortgages at this rate even exist as I can't find anything on browsing the net!

I suppose my questions to you are, what would you do in the same situation?
Do you know of any better interest rates & products available at the moment for those requiring an 85% LTV ?

And finally - in your opinion - is my friend at work talking rubbish with his 2.5% interest rate?

Many thanks in advance.
L

latecomer

Your friend will probably have had a rate which is either fixed for the lifetime of the mortgage at the base rate + 2% or perhaps initially had a different rate and the follow on rate was base rate + 2%. You wont find rates like that at the moment due to the extremely low base rate.

I have a friend who has 2 mortgages , both under 1.5% due to them being trackers taken out a few years ago so its entirely possible.

You need to decide what the best thing for you is. I doubt the base rate is going to go up by much over the next 2 years but nobody knows what will happen. Personally we are going for a 5 year fixed rate as the rates are the lowest I've ever seen.

mysk_girl

My mortgage with nationwide is on 2.5% tracker, but this is a legacy product and not offered any more. It's their Base Mortgage Rate, which is what they used to revert to after a fixed deal a few years ago.

So your friend isn't talking rubbish and may well be on a deal like this, but that deal may not be available right now.

luke222010

Thanks for both of your replies...

@latecomer - If you don't mind me asking, what interest rate have you found to be fixing for 5 years and with which bank?

Would you recommend going direct to banks myself or would it be better to get some advice from a whole-to-market broker?

Thanks again,
L.

GMS

You need to consider the bigger picture, not just a rate.

What costs are involved? Arrangement fees, valuation fees, legal fees etc can make a lower rate more expensive.

First thing to do is ask your current lender what they have to offer you.

If not suitable search the market or ask a broker to do it for you.

If you drop on to the SMR rate then consider overpayments up to your current payment. This will reduce your balance quicker.

Rates are currenly historically low so a longer term fix is potentially more attractive than a shorter term one.

luke222010

GMS wrote: »

You need to consider the bigger picture, not just a rate.

What costs are involved? Arrangement fees, valuation fees, legal fees etc can make a lower rate more expensive.

First thing to do is ask your current lender what they have to offer you.

If not suitable search the market or ask a broker to do it for you.

If you drop on to the SMR rate then consider overpayments up to your current payment. This will reduce your balance quicker.

Rates are currenly historically low so a longer term fix is potentially more attractive than a shorter term one.

Thanks for the advice.

Just out of interest, in your opinion/experience, are comparison sites such as moneysupermarket accurate with deals or do the rates offered on there depend completely on individual circumstances?
I mean, i've put our details in (salaries, remaining balance on mortgage, valuation) and then products available to us are listed, but would these rates/products then depend on further discussion with the lender?

Thanks,
L.

latecomer

luke222010 wrote: »

Thanks for both of your replies...

@latecomer - If you don't mind me asking, what interest rate have you found to be fixing for 5 years and with which bank?

We are looking at 2 mortgages - one with the Cumberland : 3.35%, £199 fees and one with the Co-op 3.49%, £499 fees but with the ability to effectively offset savings (and there is possibly membership "dividend" payments with this).

We have a low LTV of around 25-30%

As GMS said there are lots of variables to take into account - some of the lowest rates have the highest fees and also dont offer free valuations and legal fees which may make a higher rate better overall (which it is in our case).

latecomer

And with regards to the broker v direct question. We've done both in the past and dont really have strong feelings either way. We are doing this re-mortgage directly ourselves (same last time).

If you dont have time or have a complicated case then its probably worth getting a mortgage broker or IFA to do it for you.