remortgage - stay or switch lender?

CHIHUAHUA

Hi everyone

I'm at the end of a 5year deal with the Skipton BS and owe aprox 41.5K on the mortgage.
Want to pay it off within 4 years - they've offered me a 4year fixed rate of 5.84% within a 5 year term at £786 p/m but can overpay to get it down to 4 years or a bit less hopefully.
There's no fees with this and it seems like a easy way to fix the rate till the loan is paid off.
Does anyone know of any better deals out there before i sign on the dotted line!
thanks for any advice

JoeK_3

Seems a good deal.

Mortgages below £58,000 are fee sensitive and above are interest rate sensitive.

This one appears to give you everything that you are looking for.

Why the hesitancy?

JoeK

MortgageMamma

I agree with JoeK I think its a good deal, fee;s free, right term, good rate, existing lender - I doubt very much you would find something more competitive

MarkyMarkD

JoeK wrote: »

Mortgages below £58,000 are fee sensitive and above are interest rate sensitive.

That's a bit of a sweeping generalisation! The average loan size at which it becomes worth paying a fee rather than paying a higher rate used to be around that level, but with fees rising it's now a lot higher on average. I'd be surprised if many people borrowing under £100k now would find it worthwhile to pay a fee.

You need to do the maths in each case, not just rely on a fixed cut-off point.

JoeK_3

MarkyMarkD wrote: »

That's a bit of a sweeping generalisation! The average loan size at which it becomes worth paying a fee rather than paying a higher rate used to be around that level, but with fees rising it's now a lot higher on average. I'd be surprised if many people borrowing under £100k now would find it worthwhile to pay a fee.

You need to do the maths in each case, not just rely on a fixed cut-off point.

Hi Mark, have a look at this.

A recent article by Helen Loveless of the UK Financial Mail has identified that fee free UK mortgages are in fact costing borrowers more, as they will end up paying more in the end through paying higher interest rates.

An analysis conducted recently in the UK prompted the article, as it identified that fee-free UK mortgage offers are more expensive than deals with an application fee for consumers with a mortgage of £57,000 or more. This is because the interest rate is usually higher. With the average new mortgage loan now at just below £140,000, opting for a fee-free mortgage deal could cost many borrowers dear.

Fee-free UK Mortgage Comparison:

Example 1a:
Based on a mortgage of £56,000 and someone taking out a two year fixed rate of 4.47%, they would end up paying £5,005 in interest in the first two years. Add the lenders fees of £1,499 and the overall cost is £6,505

Example 1b:
Again, based on a mortgage of £56,000 and someone taking out a two year fixed rate of 5.35% but fee free, they would end up paying £5,992 in interest in the first two years.

Using the same situation as above but based on the average new UK mortgage of £138,000, the figures work out as follows:

Example 2a:
A borrower taking out a two-year fix at 4.47% and paying fees would pay £13,838 over the two years.

Example 2b:
The same borrower taking out a 5.35% two-year fix and not paying fees, would cost £14,766.

It all goes to show that the bigger the mortgage, the more money you will save by choosing the low-interest option mortgage with a fee, rather than a fee-free UK mortgage deal. From this comparison, you should be aware that fee-free mortgage deals are not what they are cracked up to be.

With interest rates increasing, this comparison is even more important.

JoeK

MarkyMarkD

If "Financial Mail" means the Financial section of the Mail, then I'm worried that you rely on them for business advice! The Mail's personal finance journalism is IMHO pretty inaccurate or competely obvious.

The example that you provide is an interesting illustration of that.

The break-even point for these two products is £85,170.

(worked out as £1499/1.76% where 1.76% is the extra interest over two years)

Interest rates increasing is irrelevant - it's the difference between the "fee free" and "fee-paid" rates that matters, not the absolute rates.

No mortgage adviser should need telling that fee-free deals are obviously poor value for someone borrowing a large amount. But they represent good value for those with small mortgages.

JoeK_3

Mark, I don't rely on them for business advice, I was illustrating a point that was printed in the Financial press to the general public some weeks ago.

I was trying to point this out to the OP who is not a mortgage adviser.

JoeK

pink123_2

what does IMHO mean??

Kellm9

pink123 wrote: »

what does IMHO mean??

Some of these abbreviations (acronyms) catch me out but I know this one. It's "In My Humble Opinion" IMHO.

Regards

MarkyMarkD

JoeK wrote: »

Mark, I don't rely on them for business advice, I was illustrating a point that was printed in the Financial press to the general public some weeks ago.

I was trying to point this out to the OP who is not a mortgage adviser.

JoeK

I think I'd suggest that a more knowledgable person than a Mail personal finance journalist (for example, almost anyone alive ) might want to give their own accurate advice, rather than reiterating incorrect stuff from the Mail.

I'd have just said that with a mortgage as low as £41.5k, remortgaging anywhere is going to likely involve prohibitive costs. So unless the original lende is offering a very poor retention deal, it's going to be cheaper to stay.

But having said that, there's never any harm in crunching the numbers to see whether you can beat the retention deal.