Staff rate mortgage

Smick100

I have had a staff rate mortgage with Bank of Ireland for just over three years now.

As it stands, it is broken in to two parts:

Non-staff element: £91k @ 3.79%
Staff element: £138k @ 4%

On top of this, my tax code is reduced for benefit in kind.

The Staff element is going to stay at 4% for the life of the loan (27 years left). The non-staff is variable.

I have £229k outstanding on a property worth £475k.

I can switch to another BOI product without valuation or very much hassle. They are offering 2.09% with £999 fee fixed until 31st Dec 2016, but then it will revert back to 4.49% and I can't go back on to a staff loan. Who knows what the market will look like in 2016/2017.


Firstly, is this staff loan worth having? Is the security of having the 4% fixed worthwhile?

Secondly, while 2.09% for 25 months, and a £999 fee isn't market leading, is the value of not having to get re-assessed, revalued worth it?

Thanks,

Smick100

amnblog

Nice to know that the staff rate is higher than the non staff rate.


How does this evidence itself in the P11D

kingstreet

I'd want a tax rebate if the true rate is 0.5% to 0.75% above the HMRC rate!

Smick100

amnblog wrote: »

Nice to know that the staff rate is higher than the non staff rate.


How does this evidence itself in the P11D

The staff rate is 4% fixed for the life of the loan.

The non-staff part is the SVR, discounted by 0.7%. So I think it is (base rate plus 3.99) - 0.7.

If the base rate went up to 10%, the non staff element would be priced at 13.29 but the staff rate would stay at 4%.

Then each year I get a statement from the bank which tells me that they are informing HMRC that I'm getting a preferential loan, the value of that, and also my BUPA and the cost of that.

Then HMRC write, advising me of my tax code for the year ahead and they tell me that BoI have written to them confirming these benefits.

Then I am taking childcare vouchers and trying to put as much in the pension as possible to keep myself under the higher tax threshold.

I no longer understand what the hell is going on so moving off a staff rate mortgage should hopefully simplify it somewhat.

TrickyDicky101

You won't suffer a BiK on the staff rate as HMRC allow anything from 3.25% upwards (under current BiK rates - note this was 4% until recently). These can and do change, so if market rates were to rise significantly from their current level, expect HMRC to revise the BiK rate). Personally, I would keep the security of a 4% fixed for 27 years.

Smick100

TrickyDicky101 wrote: »

You won't suffer a BiK on the staff rate as HMRC allow anything from 3.25% upwards (under current BiK rates - note this was 4% until recently). These can and do change, so if market rates were to rise significantly from their current level, expect HMRC to revise the BiK rate). Personally, I would keep the security of a 4% fixed for 27 years.

Thanks TD. The thing is, I have a baby going in to childcare in the next few months and freeing up £220 per month will really help, so my thoughts are to free up the money in the short term by going on the cheaper rate, although it might bite me in the long run.

Do you think the financial benefits would be marginal in sticking?

I'm presuming that if interest rates rise wildly, it will be in a period of wage inflation and hopefully I won't get stuck.

getmore4less

can you just move the non staff portion to a new deal?

Smick100

getmore4less wrote: »

can you just move the non staff portion to a new deal?

I will ask. I suppose what I have at present is a 27 year fix at 4%, as long as I stay working here.

I can't see the benefit for them in doing that though. I guess the point of offering me the reduced rate is to prevent me from moving to another bank. However, with a split mortgage, would they really do that?

Plus, I have to pay the £1,000 booking fee on a 91k mortgage, which reduces the benefit.

If the base rate were to rise to 8% tomorrow, I would pay 12.29% on the reduced SVR, roughly £968 per month. Plus 4% on the 138k, roughly £697. HMRC could give a standard comparison rate of 11%, giving £255 BIK per month. £1920 per month.

Would give me a £200 monthly saving on a 9.9% rate.

4% fixed for life will seem like a bargain in 2 years.

d70cw6

base rate is rising to 8% tomorrow?!

glad i fixed! ouch!

Goldiegirl

I had a staff rate mortgage, and always stuck with it.

It was 5%, and in the days of high interest that was very worthwhile even with having to pay tax on the benefit.

When 5% was no longer attractive they brought out a new staff rate - a tracker that tracked the BOE base rate. So that was a very low rate that was worth keeping.

If you don't feel that your staff rate product is right for you at the moment, and you went for any other product or remortgaged, would you be able to remortgage back to the staff rate at a later date?

If I was allowed back on the staff rate at a later date when it suited me, I'd probably do what I felt was better for me now. If I wasn't allowed back, I'd probably stick with the staff rate for the security. 4% could be a low rate in years to come.

Smick100

Goldiegirl wrote: »

I had a staff rate mortgage, and always stuck with it.

It was 5%, and in the days of high interest that was very worthwhile even with having to pay tax on the benefit.

When 5% was no longer attractive they brought out a new staff rate - a tracker that tracked the BOE base rate. So that was a very low rate that was worth keeping.

If you don't feel that your staff rate product is right for you at the moment, and you went for any other product or remortgaged, would you be able to remortgage back to the staff rate at a later date?

If I was allowed back on the staff rate at a later date when it suited me, I'd probably do what I felt was better for me now. If I wasn't allowed back, I'd probably stick with the staff rate for the security. 4% could be a low rate in years to come.

No, apparently it is a once-off deal. If you move home, you can port your deal to your new mortgage. But once you give it up, that's it.

I think I will leave it for the time being, but if we get strapped for cash, I will make the change.