Standard Variable v Fixed

Peppa_P

Hi, my mortgage is on the standard variable rate of 3.99% at the moment. What are everyone's thoughts on whether I should stick on the SVR or switch to a fixed rate of 3.54% for 2 years or 3.74% for 3 years?

Any advice much appreciated!

Thanks
Chris

Thrugelmir

You also need to factor the product fees into any decision when evaluating , not just the interest rate.

opinions4u

Peppa_P wrote: »

Hi, my mortgage is on the standard variable rate of 3.99% at the moment. What are everyone's thoughts on whether I should stick on the SVR or switch to a fixed rate of 3.54% for 2 years or 3.74% for 3 years?

Assuming you won't be moving house, or significantly overpaying the mortgage, and there are no fees for the fixed options ...

... do you think the SVR is going to reduce? If no, that reduces your number of choices.

Peppa_P

There are no product fees and the SVR will not reduce below 3.99%. We want to stay with our current mortgage provider but I suppose my concern is that a better deal/product is released by them after I take the fixed term deal - perhaps unlikely given interest rates are only likely to go one way (and probably sooner than anticipated)?

Thanks again

dimbo61

what is your LTV now and what will it be in 2/3 years?
Security for the next 2/3 years! Will anything important change in the next 2/3 years!
Ie other half go back to work full time, Kids start school/six form or University.
Big increase in pay due to move up in job because you have finished uni/course/training?
Overpay every month if you can

Peppa_P

Our LTV is about 80% and its likely to be down to at least 70-75% in 2/3 years as our house will go up in value (we are lucky with location). My wife is due with our second child a week today and will go back to work part-time in August/September - meaning we are likely to be about £750 a month worse off after that. We could afford to overpay but have substantial credit card debt (c.£30k) and are trying to throw every spare penny into that debt.

My thinking is that we should go for the fixed rate mortgage as interest rates are likely to go up sooner than later. Agree?

Thanks

fewcloudy

It depends when you thought the rates WERE going to go up, and when you now think they will WILL go up. None of us know.

Some aspects of the economy have shown signs of improvement a little bit quicker than anticipated, but overall the economic situation is still very grim IMO.

The newspapers I read don't have a clue what is going to happen, and often write misleading headlines, which can feed into the system to give a misleading idea of the true situation. An example of that would be the number of house sales in a given period. I often read something to the effect of "Last month showed the biggest rise in house sales since blah blah blah" or " House prices increased by 10% over the last blah blah blah"

But although that might technically be a sign of improvement, the number of sales will be a tiny fraction of what it was in 2007 pre-crash. I don't have the figures but I am certain that there is nothing like the amount of house sales/building taking place today, than 10 years ago.

So, will rates rise SOONER than anticipated by you? Possibly, no-one knows. Knowledgeable people thought they might rise a few years after they his 0.5% back in early 2009. Wrong. The same folks saying the same thing now, probably wrong again.

And even if it does rise, for you it depends by how much and how often. Repeat, no-one knows. But if the merest whiff of a rise will cause unbearable strain on your finances, then yes, you should probably pay to fix.

fewcloudy

Just noticed your comment re. 'substantial credit card debt (c.30k)'

I hope as much of it as possible is on 0% interest rate cards? If not, look here;

http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards

dimbo61

With £30K of CC debt and your second child due soon I would look at the 3 year fix and spend the next 3 years trying to clear the CC debt and hope your LTV is 75% or less in three years time.