Does the follow on rate really matter?

dmarks

Hi As no one knows what is going to happen to rates in the future does one need to take into account the follow on rate of a mortgage if they take out a longer term (5year+) fix? Just wanted to kind out some opinions!

Dan-Dan

depends what your credit worthiness is like after the fix doesnt it , if you `misbehave` during the fixed period , you might be stranded on the current providers standard rate

mrcow

Also, if you e.g. split from your partner, change jobs, you may find yourself in a position where you are unable to renegotiate with a new lender.

luckbox

You can also suffer from a drop in the value of your house and then will be unable to remortgage due to ltv issues.

getmore4less

Given that in most case the best long term stratagy is the lowest cost tracker you can get, having a good followon rate is one step in that direction.

As above you never know you can remortgage or get another deal or if you can what the fees would be.

JimmyTheWig

There are reasons why you may end up on the follow on rate for a short time or longer...
* You are planning to move in the near future and don't want to tie yourself in to another fixed rate.
* Your financial position has changed (e.g. new job, no job, poor credit history) and you will no longer get accepted for the best deals.
* Your LTV has dropped due to house prices falling which means you won't qualify for a new deal.
* The mortgage market has changed meaning deals are no longer available.
* Arrangement fees for products that have decent rates may be too high to make it worth switching.

It sort of depends on how long you have left on your mortgage. If not too long then you will have cleared a significant chunk in 5 years. Which means (a) the rate you go onto becomes less important and (b) you are less likely to be hit with LTV problems, etc.

Personally I would concentrate on the cost (including fees) for the duration of the deal. I guess it might be worth, as an average, factoring in 6 months of being on the follow on rate?

Thrugelmir

Switching lenders may well cost money and as the mortgage balance reduces be uneconomic. So yes. follow rate does matter.

Too easy to be seduced by a saving today. When in the longer term may actually cost more.