Worried about affordability

Sstripey

Re the fixed rate mortgage:

When we moved 20 years ago to the house we still live in, we had to take out what for then was a pretty big mortgage, with monthly repayments taking around half of our joint net income. Working out our budget at the time showed that if the mortgage rate went up at all (it was then 10.6%, but a few years before it had been around 15%) then we would struggle to balance our books, so we went for a 10-year fix. Our rationale was similar to what I am assuming yours to be, i.e. that we wanted to know for sure how much it would cost for a measured period of time.

Interest rates then started to fall, so much that we bought out of that fixed rate (it cost six months' interest payments to do that) to get into a considerably lower one, which in the end would cost us less.

However interest rates are low at present and general opinion seems to be that if they move, then they can't go much lower. So there are attractive points about fixing. Check to see what it costs to ditch the fix, should interest rates fall enough to make a switch worthwhile. Balance this against the relative gamble of going for a variable rate mortgage, measured up against how much room you have for manoeuvre with your finances if rates go up.

I agree with all the advice about finding a bigger deposit rather than a smaller one, if you can. Best of luck with this.

mrs_smith_2

Thanks again.

I think L&C mentioned Natwest and maybe Nationwide but I can't quite remember now (and I know someone who recently had a Natwest mortgage which looked very closely at their outgoings). I will just have to wait until tomorrow but it's feeling like a long weekend! Am really hoping they knew what they were talking about.

In some ways it seems like an obvious thing to do to go for a fixed as even the tracker rates aren't that low if you don't have a large deposit. Thanks for the good wishes.

Sstripey

Our mortgage was with Nat West. The only downside then (1992) was that it had to be an endowment, as that was the only basis on which they would agree the mortgage. They put us with Scottish Provident, whose life policy performed awfully, so much that I surrendered it this year, as I was confident I could do better with a 5-year fixed savings. We moved our mortgage when we could to an RBS Current Account Mortgage, which was much better, as we paid it off that way seven years early.
Luckily, you won't have to take out an endowment mortgage, as they're dead in the water - do let us know how you get on.:)

mrs_smith_2

Thanks for all the messages. Our application is in and L&C are confident it will go through (I think they have spoken to the lendor and gone through our details). It is with a building society who work on multiples so we should be fine. The monthly payments should only be about £80 more than we pay now and it is a 5 year fix so I think we are still being reasonable sensible. Just got to wait now for it to go through.

Sstripey

Well done, and good luck with it all.