Remortgaging to consolidate debt. Fixedor Standard variable?

Burchy

I'm looking to consolidate about £10000of debt within my mortgage. My current provider (TSB) will allow me to do this as an add on to my mortgage at a rate of 5.89% (£84 pcm) fixed for 2 years, while keeping my my main mortgage (£73,950) on a standard variable rate of 2.5%. This eqates to a total monthly mortgage payment of £562 pcm.
I have also had a quote from Yorkshire Bank who will offer me a mortgage for £83,950 at 3.24% fixed for 5 years. This equates to £589 pcm. Although this is obviously more than my banks quote I'm thinking that with interest rates set to rise within the next 18 months it might offer a degree of security. My question is when interests do rise are they liable to rise slowly in which case I might still be better off with the TSB or is it likely that the trend that rates will spiral upwards. The Yorkshire also offers a 10 yearfix at 3.89% (£616 pcm).
Any thoughts dont want to pay the swines anymore than I have to!

Thrugelmir

Is the YB aware that consolidation of debt is part of the exercise?

Burchy

Thanks for your reply Thrugelmir.Yes they are aware that it's for debt consolidation.
Are you saying that in our current state of optimism low interests are about to end and it's best to fix? If so. fix 5 or 10?

Keekles

Is this an absolute must, in terms of repaying the £10k which I assume you have in unsecured borrowing? I'm not sure it would be the advice you'd find elsewhere on the forum.

I don't think Thrugelmir mentioned anything in relation to interest rates.. however, ultimately it's very likely they won't be going down any further and it is just a case of time as to when they begin to rise. I don't think anyone can accurately predict how steep the incline will be however.

5 or 10 is purely down to your personal circumstances; your best bet is to approach a broker that will have access to multiple lenders and advise you directly on your current situation.

Thrugelmir

Only fix for 10 if you are very certain of remaining in the property.

No one can predict future rate rises. With all fixed rate rate products do check the follow on rate. As many carry a sting in the tail.

kingstreet

Burchy wrote: »

I have also had a quote from Yorkshire Bank who will offer me a mortgage for £83,950 at 3.24% fixed for 5 years

Yorkshire Bank (part of National Australia Bank Group), or Yorkshire Building Society?

The attitude is very different in each case.

guymo

Thrugelmir wrote: »

With all fixed rate rate products do check the follow on rate. As many carry a sting in the tail.

Can you explain this a little please? I don't think I've noticed deals with such a sting.

As far as I've seen, fixed rate mortgages advertise themselves as moving to SVR at the end of the term, and the borrower is free to shift to another mortgage arrangement if he or she chooses. Is that not always the case?

Yorkie1

guymo wrote: »

Can you explain this a little please? I don't think I've noticed deals with such a sting.

As far as I've seen, fixed rate mortgages advertise themselves as moving to SVR at the end of the term, and the borrower is free to shift to another mortgage arrangement if he or she chooses. Is that not always the case?

Lenders' SVRs vary hugely. At the moment, for example, Nationwide is I think 3.99%, whereas another lender I saw mentioned on here recently was well over 5% if I recall.

You can always plan to remortgage at the end of the fixed rate, but in the event that that isn't possible for any reason, you'd go onto the SVR - therefore worth looking at how these compare when making the initial assessment of which mortgage to go for.

Thrugelmir

guymo wrote: »

Can you explain this a little please? I don't think I've noticed deals with such a sting.

As far as I've seen, fixed rate mortgages advertise themselves as moving to SVR at the end of the term, and the borrower is free to shift to another mortgage arrangement if he or she chooses. Is that not always the case?

By sting. I am referring to the higher SVR's written into the product details. Lenders SVR's differ widely at the moment.

Moving is an an option. However it comes at a cost, i.e. product fees if the same lender. If remortgaging to a new lender possibly valuation, legal and redemption fees as well.

As the mortgage balance reduces then the costs become disproportionate to the amount of the mortgage. Something that should be borne in mind.

guymo

Thrugelmir wrote: »

As the mortgage balance reduces then the costs become disproportionate to the amount of the mortgage. Something that should be borne in mind.

This is a good point that essentially didn't occur to me because I owe more money than I could ever imagine repaying.

kingstreet

I routinely discuss Accord's 5.99% SVR. If the borrower cannot remortgage at the end of the fix (due to change in circumstances) and Accord will not offer a customer retention product, they will be a prisoner on 5.99%, or equivalent at the time.

It means putting the first couple of years at a very high priority you're willing to risk the other twenty/thirty odd.