Offset mortgage vs 2.79% 5yr fix?

michaels

yeahdisk wrote: »

We're just going through the process with co-op and this is what we were told....

You can overpay 10% a year without charge on their fixed rate products. This applies to any Brittania or Smile mortgage as well (same company).

However, only their online products (coop online or smile) allow you to redraw the overpayments in the future.

Because of this we signed up online. Hpe this helps

Interesting, I was told that Britania didn't provide the same flexible facility and the coop mortgages only seem to be available by phone not online and the agent definitely told me the overpayment pot could be withdrawn.

michaels

Matt_The_Chippy wrote: »

I've just seen this thread and wanted to add my tuppence to things.

I'm with Santander on their Offset mortgage 2.99% over base rate (3.49%). This rate is for the life of the mortgage. I love this product compared to a regular repayment mortgage. I can overpay any amount without fear of penalties, I can reclaim any amount that is in the offset with a days notice.

I've never been a saver in my life but I'm finding myself looking for money to put into the mortgage account. So, it could be worth considering if it fits your needs like ours.

My offset is 1% cheaper than this and I am pretty certain to switch to the fix and work around the annual overpayment limit using ISAs etc to the full.

It is a gamble that will cost me £80 per month if rates don't rise over the 5 years but will make me a mint if they do.

getmore4less

latecomer wrote: »

Did Barclays not give any notice of the change?

Didn't get a chance to look through the paperwork last night but will try and do it tonight. We (well I ) intend to sweep our remaining cash into this each month so its something I definitely want to check before using

THey did give plenty of notice but a lot of people did not understand what it meant to their lending, barclays operate the refundable overpayments through an overdraft on a current account and they withdrew some of this facility for some borrowers.

This is what makes an offset so much better as good as overpayments but the money is aways yours the worst they can do is withdraw the offsetting.

latecomer

My understanding from speaking to several Co-op mortgage advisors is that the funds are held separately to the mortgage (or any other account).

I managed to have a quick look through the paperwork last night and found 2 mentions of this. The first was in a booklet called Understanding your mortgage and states that the Borrow back facility is available to allow overpayments to be at any point (or words to that effect)

In the actual mortgage offer it states that the overpayment funds can be accessed on request (words to that effect - twas very late )

There is also mentions of it in their news section of the Co-op website (from 2009):

All mortgages provided by The Co-operative Bank include a range of flexible features, including the facility to make overpayments without penalty, and the flexibility for customers to be able to borrow back their overpayments at any time.

Yorkie1

latecomer wrote: »

My understanding from speaking to several Co-op mortgage advisors is that the funds are held separately to the mortgage (or any other account).

I managed to have a quick look through the paperwork last night and found 2 mentions of this. The first was in a booklet called Understanding your mortgage and states that the Borrow back facility is available to allow overpayments to be at any point (or words to that effect)

In the actual mortgage offer it states that the overpayment funds can be accessed on request (words to that effect - twas very late )

There is also mentions of it in their news section of the Co-op website (from 2009):

That's right. Co-op effectively holds the funds in a type of offset arrangement; Britannia just puts the money towards immediate overpayments without refund.

I think that drawing down the overpayments with Co-op is still subject to lender's discretion though.

RedMonty

Many thanks for the discussion guys. Very informative. I am contacting my financial advisor to see what they say re FD / Co-op & will feed back when I hear from them in a few days.

I wish it was possible to split a mortgage in two - then I'd put half with the Co-op & their 5 year fix, & half with FD for offset. Reality, fees, & first claim to the property says otherwise

My partner said if rates are not likely to go up for 2 years, then why not get a cheap, low 2 year deal now, then a 5 year fix, for a total of 7 years at low rates? Hmm, bit of a gamble

marathonic

RedMonty wrote: »

My partner said if rates are not likely to go up for 2 years, then why not get a cheap, low 2 year deal now, then a 5 year fix, for a total of 7 years at low rates? Hmm, bit of a gamble

Because the reason 5-year fixes are so low is that noone expects rates to increase for a couple of years.

In two years time, if rate increases are imminent, 5 year fixes will be a lot more expensive.

sebtomato

RedMonty wrote: »

However, my partner and I have quite high cash savings - about £9k in individual + joint accounts, 11k in savings accounts, plus I might be able to source another 10k from my underperforming shares.

I would argue that having £20K of cash savings, for a family with 2 kids, and with a home worth £330K is not actually that high, and is probably 4-5 months of outgoings?
Surely, it's probably much better than the vast majority of people in absolute numbers.

getmore4less

sebtomato wrote: »

I would argue that having £20K of cash savings, for a family with 2 kids, and with a home worth £330K is not actually that high, and is probably 4-5 months of outgoings?
Surely, it's probably much better than the vast majority of people in absolute numbers.

It's not the value of the house it's the size of the debt.

marathonic

sebtomato wrote: »

I would argue that having £20K of cash savings, for a family with 2 kids, and with a home worth £330K is not actually that high, and is probably 4-5 months of outgoings?
Surely, it's probably much better than the vast majority of people in absolute numbers.

I'd disagree with this. With a £330k mortgage, it may be pushing it but they've only a £130k mortgage.

Of course, it all depends on salary and outgoings but the OP stated "We're good at saving - no car, few holidays etc".

If I were to guess, I'd say a person in the OP's position is likely to be in a professional job, probably with a good income protection plan in the benefits package. If this is the case, life insurance and about 6 months worth of outgoings would be sufficient cash for any family.