Changing mortgage, please advise.

Smeggy

First post here, so please be gentle!

My wife and I have a mortgage with Lloyds via Cheltenham and Gloucester. We currently owe £66,096.70 with fourteen years and eleven months to run. At present we are paying £474.45 per month on a 2.50% variable rate. With the rumours of a possible interest rate rise coming sooner rather than later we popped into our local branch earlier today to see what they could offer us in the way of fixed rates. Here are the options made available to us:

Two years fixed at 2.69% making monthly payments £472 pcm.

Four years fixed at 3.39% making monthly payments £480 pcm.

Four years fixed at 3.39% and shortening the term of the mortgage to an even fourteen years making monthly payments £495 pcm.

I should add, the new monthly payments are so close to the current amount we're paying because of a few overpayments we made in the past in case anyone is confused why the 2.69% option offers a lower repayment than the current 2.50%.

There is no arrangement fee for any of them and we're leaning towards the last option at the moment as whereas the current rate may only creep up by a half a percent initially, four years is a long time. Thoughts please.

getmore4less

whats the follow on rate? looks like 3.99%

http://www.cheltglos.co.uk/mortgages/Your-Account/Interest-Rate-Information

think carefully before giving up a base+2% tracker.

Smeggy

Crap. Thanks for spotting that. It wasn't mentioned at all in the branch. I know nobody knows and that it is a gamble, but does anyone think interest rates will go up by much in the next couple of years or so? It does sound that I may be better off taking my chances and staying on my current rate. Sorry, if I'm asking naive questions. I really am quite clueless with mortgages.

Tena

Smeggy wrote: »

Crap. Thanks for spotting that. It wasn't mentioned at all in the branch. I know nobody knows and that it is a gamble, but does anyone think interest rates will go up by much in the next couple of years or so? It does sound that I may be better off taking my chances and staying on my current rate. Sorry, if I'm asking naive questions. I really am quite clueless with mortgages.

Were Lloyds not able to offer you advice? I personally found that no one will really be able to accuratly say what will happen to "interest rates". Firstly a lot of people refer to interest rates as in the base rate (this is discussed and agreed by the MPC each month as far as I'm aware, so its impossible to base your mortgage on that as even the MPC don't know until their meeting!). If you're referring to bank mortgage interest rates then these change frequently, some each week! various factors, lending appetite, capital balancing, competition, help to buy etc. You should base your mortgage product on your OWN specific needs. This might mean somone who has a high disposable income could afford to take a gamble of a tracker perhaps or someone with very little dips inomce couldn't afford a rate hike of more than £25 in monetary terms so fixed would be a "safer" option rather than a "chepaer" option per se. The question you're asking sounds like it could be answered with sound mortgage advice from an FCA registered professional. If the bank can't offer advice then I'm sure a local IFA would be more than happy to assist. Good luck