To Fix or Not?

SheldonsSister

My fixed rate ends in August. Halifax have told me that I can go onto the base rate at 3.99% or fix for 5 years, the interest for the product they would offer at the moment is 4.49%.

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Being in negative equity I believe I will have to stay with them and can't look elsewhere. I'm looking to have paid off the negative and saved a deposit for a bigger property in around 2 years. Halifax say that the mortgage can be taken to the new property.

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I am an absolute mortgage novice. Fixing at 4.49% sounds attractive to me but to be honest I don't know the pros and cons either way. Does anyone have any advice?

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hillcats

The first thing I think in answer to your question is -
Can you afford to make your repayments if the BofE interest rate increased by 2% tomorrow and your lender followed them increasing it SVR by the same to 5.99% ??

SheldonsSister

hillcats wrote: »

The first thing I think in answer to your question is -
Can you afford to make your repayments if the BofE interest rate increased by 2% tomorrow and your lender followed them increasing it SVR by the same to 5.99% ??

Thanks, I think we could afford it but obviously it would impact what we're able to save. Looks like fixing is the way to go.

aggypanthus

In the newspaper yesterday it reckons rates will go lower and dont fix right now.
I stayed on halifax var rate , that was about 4 yrs ago,I wont be fixing yet, certainly not at a higher rate.

originalmiscellany

Do you have any way of getting money into your house to get out of negative equity e.g. savings tucked away or are you in deep negative equity? Even going from 5% to 10% equity in your house makes a big difference to mortgages available to you.

markvirgo

House prices are on the rise and a recovery is expected

Rates are expected to rise late 2013 early 2014 that is the research I have found when looking if I should fix.

I would suggest that as there are better rates out there I would try to get out of negative equity and move to a different lender.

I am not a Mortgage advisor and offer advise only.

kingstreet

If there was a prospect of rate rises later this year, the markets would already be factoring them into swap rates and fixed rate money would already be getting more expensive.

No significant increases are expected until around 2017, but this is just my opinion and completely subjective.

pjread

Personally, if I was in your situation I'd take the 5 year fix. 0.5% isn't a lot really to guarantee no rises in 5 years, by which time hopefully you're out of negative equity.

As others said, that's assuming you don't have the capability to get your LTV to 90% or below somehow. (I doubt you'd beat 4.49 on a 5 year fix above 85% TBH)

If you genuinely can afford to absorb a big rate rise if it does happen, then staying on the SVR (and my advice - overpay!) is not the worst plan in the world, as a rise is fairly unlikely in the short term IMO.

opinions4u

If it's no fee, you think it's unlikely that you'll get out of negative equity through saving / price rises and you've no plans to move - fix.

The economy is beginning to move, the government is throwing a bit too much at the housing market and sooner or later they will want to calm it - raising rates being the best way to do that.

SheldonsSister

Thanks for the replies. According to Halifax's valuation we are only in negative by about £200. However the property a few doors down was up for sale at £5900 less than what we owe so I've been basing figures on that. By the end of July I should have 5900 in savings and probably another 4000 by the end of the year. I think that would only be 10% equity going by their valuation.

Can someone tell me whether I should keep the money for a deposit to move as cash or pay it off the mortgage now? Would it make a difference to buying a new property, would I have to sell mine first?

pjread

Well, what interest rate are you paying on the mortgage and what are you getting for the savings?

If you're planning to move, make sure that 5-year fix is portable and you won't get hit for early repayment charges before agreeing to anything!

And maybe check if you can get a better rate off Halifax if you pay that ~5-6k you already have into the mortgage - if it decreases the rate on the whole loan so much the better.