How does this mortgage sound?

ellie27

We are going for a mortgage through a broker due to other half being an IT contractor...

Broker has come up with what he thinks is our best option.....
House value £249k
Mortgage £100k

2 yr tracker 1.45% + base rate then standard variable rate 4.24%

How does that sound?

Not as good as our current 0.95% interest rate!!! But unfortunately we cannot port it!!!

Thrugelmir

ellie27 wrote: »

Not as good as our current 0.95% interest rate!!! But unfortunately we cannot port it!!!

Don't move. Continue to save.

ellie27

Thrugelmir wrote: »

Don't move. Continue to save.

We need to move, our daughter starts school August 2015 and our catchment school is one of the worst in Scotland! So we are buying into an area with good schools!

kidmugsy

ellie27 wrote: »

We need to move, our daughter starts school August 2015 and our catchment school is one of the worst in Scotland! So we are buying into an area with good schools!

The wonders of semi-private education.

Thrugelmir

ellie27 wrote: »

2 yr tracker 1.45% + base rate then standard variable rate 4.24%

How does that sound?

Depends on your view of BOE base rate in 2 years time. As interest rates are going to rise. So what rate will you then fix at? The SVR as the name suggests is variable.

ellie27

Thrugelmir wrote: »

Depends on your view of BOE base rate in 2 years time. As interest rates are going to rise. So what rate will you then fix at? The SVR as the name suggests is variable.

Sorry, I really dont have a clue what you mean! Our current mortgage is our first and only ever mortgage so and it was a tracker from day 1 when we took it out almost 7 yrs ago.....

Thrugelmir

Broker is suggesting 1.45% plus BOE base (currently set at 0.5%) so 1.95%.

If over the next 2 years the BOE raise base rate by 2%. You're mortgage will cost 3.95%.

At the end of the 2 year term. The lenders SVR will no longer be 4.24% but possibly 5.74%. I've only increased it 1.5% as suspect lending margins will narrow as base rate rises.

With base rate at 2.5% in 2 years time. A new fixed rate product could cost be in the region of 4.5% to 5.5%.

So while there's an attraction now for a low rate. The offset is potentially a higher rate for the years afterwards. As opposed to say taking out a 5 year fix now albeit at a higher rate. Swings and roundabouts as they say

The only certainty is that interest rates will rise. Perhaps very slowly but eventually a return to normal levels.

The reason that the lender is offering this attractive deal now is that the BOE allowed lenders to borrow cheaply. Lenders need to advance this money now but are only able to do so over a short time window. As they themselves will incur higher interest charges inthe future.

getmore4less

Can't see the point of a 2 year discount tracker.

other than more work for the broker in 2 years

What fees? On small short term loans like this they are important

Which lender what else do they have

A lifetime tracker would probably be a better option.

LTV is good so should be getting the best rates based on that already.

If the income is good but potentially variable as well then an offset might be worth a look if you need a decent sized emergency fund and as a contractor need somewhere to keep tax.

ellie27

Anyone else any suggestions?

Thrugelmir

ellie27 wrote: »

Anyone else any suggestions?

Your choice as to what suits you. Your plans, budget etc. Not a question of right or wrong.

Fixed rate mortgages do give peace of mind. If affordability is any way a potential issue.

What alternatives did your broker give?

As headline rates can be deceptive.

ellie27

He only recommended the one, Coventry, with rates as above, my other half just told him we were currently on a tracker.

But did say 2 yr fixed start at around 2.19%