Stay on low SVR or Fix

marc-h_2

I was after a few opinions on what people would do in my situation. We are currently on a base rate plus 2% SVR mortgage with no limitations but obviously at some point when interest rates rise it will start to look very poor value.

At the minute the best deal we can find for a fix is about 3.09% for 5 years with £1000 fee. Fixed rates are going up quickly and no doubt will shoot up even further when the base rate goes up later this year/next year but at the minute our current deal is cheaper and will be until rates rise by 0.6%. This could be a year a way or more.

Anyone got any thoughts on what they would do and what might be our best option?

Thanks!

Thrugelmir

marc-h wrote: »

but obviously at some point when interest rates rise it will start to look very poor value.

You need to view your mortgage over the whole term not fix term product to fix term product. 2% above base for the life time of your mortgage is a highly competitive rate.

Suggest you take a look at the follow on rates for the products you are considering. Lenders are sucking you in with short term rates that have a sting in the tail.

Rather than pay £1,000 product fees use the money to pay down your mortgage.

Now is the time to overpay your mortgage and reduce the capital balance owed as quickly as you can. The less you owe, the less interest you'll pay, and the less you'll be impacted by future rises.

marc-h_2

Thanks for the reply. Is the consensus of opinion that things won't go back to how they used to be for a long time? 2% above base rate didn't use to be a good rate and I'd assumed that eventually that would be the case again. There is a good chance that in 18-24 months I'll be paying about 3.5% on my 2% above base rate deal which starts to look poor value against some of the fixed rates available now. Our LTV is good as we've already taken advantage of the low rates to pay off a massive chunk of our mortgage and we are continuing to pay double each month.

getmore4less

if things return where the base + 2% is no longer competitive then that's the time to change so the better tracker at the time.


overpayments as if you were on your fix and the longer your rate is below the fix the higher the rate you can go to before you are worse of during the fix period.


That's before you then have to consider your next SVR will be base + loads.

marsman802

There's a feeling we are looking at 3% within 3yrs. To me that is a long old way off.
Even if we creep to 1.5% in the next 18months that's still only 3.5% to you unless there's something more to that SVR that allows the lender to up it.
I think you are in quite an envious position right now as you can just keep paying off your mortgage and make a decision to fix much further down the line - also saves you all those valuation and product fees at the moment.

I currently pay 3.99% until next April and I can't wait to get the chance to switch - I too took the view rates would start rising and in the end its cost us but on the flipside we know we'll be looking at the cheapest mortgages out there next year.

marc-h_2

Thanks for the replies. One of the big things I wasn't fully considering is what will be available in 5 years. If I fix now I'll be on a rubbish rate in 5 years and needing to shop around again. Do people think Base Rate plus 2% would be competitive in 5 years time?

I've been doing some quick sums and if rates go up to 3% gradually over the next 3 years and then stay at 3% for 2 years, my current deal will cost me about £2000 extra over 5 years compared to a new fixed deal (even when including fees). So to stick with what I'm on now I'd need to be of the opinion that base rate plus 2% would be much better than any deal I could get in 5 years or that I could pick up a decent deal at some point in the next 5 years.

Thrugelmir

marc-h wrote: »

2% above base rate didn't use to be a good rate and I'd assumed that eventually that would be the case again.

2% above base was the norm for SVR's pre the credit boom era.

Days of cheap money are over. The banks no longer subsidise mortgage rates with PPI income. Added to which banks have far higher regulatory and taxation costs to cover. All of which means they need to make a wider margin.