building society flexible variable rate mortgage

pamelaj1976

Hi there,

I am re-mortgaging and my mortgage advisor has recommended a flexible variable rate mortgage with a building society over fixed rate deals with banks. He says that because it's a building society it doesn't have share holders to satisfy and is run for the benefit of it's members so is unlikely (but not guaranteed) to become uncompetitive. The mortgage is free to switch so should it become uncompetitive we can change lender any time.

Is this good advice or should we fix as I know rates are low right now?

Thanks!

kingstreet

You need to base your judgment on how you feel about future rates and how you would be impacted by rate changes. There is no stock answer for everyone.

Presumably your broker has matched a product to your needs and rate outlook?

pamelaj1976

Thanks, yep, the advisor has matched needs to rate outlook and we could take a rate change should there be one however I would normally be inclined to take a fixed rate for peace of mind. I'm more interested to know if others are of the same opinion as my broker that a building society variable rate is a particularly good option as it's unlikely to ever be uncompetitive over time? - this could convince me to go with the variable rate.

kingstreet

Which lender and what is the rate?

Is it standard variable rate, or something like the Coventry FLEXX for life?

ACG

I agree there is no stock answer for everyone but with rates at an all time low, a rate war going on with expected rises next year - why would you not want to fix?

pamelaj1976

I don't know the lender, rate is 2.79. Flexible variable rate for the mortgage term

samba

ACG wrote: »

I agree there is no stock answer for everyone but with rates at an all time low, a rate war going on with expected rises next year - why would you not want to fix?

Because fixed deals are only ever temporary, and you will either end up on a higher variable rate or need to remortgage onto another fixed deal. If rates have gone up in between, then your next fixed deal may be worse then if you were on a low rate tracker or discounted variable rate in the first place, plus you will have to stump up more fees.

As regards a rate war, I don't really see it at the moment. There seems to be quite a big spread between the BoE base rate and current fixed and SVR rates and if there was a rate war this gap would be much less. Also, I think there is room for some base rate rises before the banks and building societies *have* to react to protect their bottom line, although I suspect they may put up their rates at the earliest possible opportunity - they are really creaming it in at the moment and will want to continue to do so for as long as possible.

ACG

If you miss the boat on a tracker rate then you could find by the time you do want to switch to a fixed rate - the fixed rate products are higher, meaning any savings are then lost?

Emails aplenty at the minute from lenders telling us how they have reduced their rates.

Im not saying your wrong but I imagine only a minority of people are doing trackers at the minute.

Thrugelmir

pamelaj1976 wrote: »

He says that because it's a building society it doesn't have share holders to satisfy and is run for the benefit of it's members so is unlikely (but not guaranteed) to become uncompetitive.

Mortgage lending is a competitive market. With very low margins. The downside for Building Societies is having the same access to funds (deposits) as Banks.