Tracker mortgages when the base rate rises

Jhoney_2

Thanks for all your help with understanding some of the considerations I should be assessing.

My loan will be c100k with the aim of leaving a residual balance by year 10? Not sure about if that's a good idea yet either, lol. I intend to overpay monthly and a make lumpsum
payment in y5 or y9.
I know that it is usefule not to rate chase if the mortgage is "low" e.g better for free legals/cashbacks/valuation, but trying to find value for money with these relatively new products (to me) is hard to assess, if for example, my only route was execution only.

Thrugelmir

getmore4less wrote: »

Margins on all rates have been getting lower since then(after the initial scare rises early on).

Funding for Lending (mortgages) is still impacting the market as lenders utilise the remaining funds that they've drawn down. Post 2016 these funds will start to be repaid. As the 4 year Treasury bills issued mature.

FLS amounted to some £70 billion of funding during it's tenure. So this will have to be replaced by retail deposits or other wholesale sourced funds.

getmore4less

Contrary to the message sold fixes are not the onlyoption for the risk adverse. They are sold on that because the only risk that is considered is the payment, it is easy to convince many people that if they fix their payment they are reducing risk when in many cases they are increasing or changing the risks.

jamesd

Jhoney wrote: »

I intend to overpay monthly and a make lumpsum ... payment in y5 or y9.

Why? It's easier to get interest rates from investments that are way above mortgage interest rates at the moment. P2P is one way but there are others.

Unless you really can't deal with the ups and downs of investing, but that would be something you should look to try to fix with experience if you can, because you need to be reasonably comfortable with investing for retirement planning.

Thrugelmir

jamesd wrote: »

It's easier to get interest rates from investments that are way above mortgage interest rates at the moment. P2P is one way but there are others.

Maybe that's because mortgage lending lending is secured whereas P2P isn't. Why do SME's prefer P2P to borrow money rather than banks who offer lower rates. That's a far more interesting question.

Jhoney_2

Thrugelmir wrote: »

Maybe that's because mortgage lending lending is secured whereas P2P isn't. Why do SME's prefer P2P to borrow money rather than banks who offer lower rates. That's a far more interesting question.

jamesd wrote: »

Why? It's easier to get interest rates from investments that are way above mortgage interest rates at the moment. P2P is one way but there are others.

Unless you really can't deal with the ups and downs of investing, but that would be something you should look to try to fix with experience if you can, because you need to be reasonably comfortable with investing for retirement planning.

Sorry, don't know what this means. Will try google. Ah I see! No, I don't feel that this is a route I would take.

My thoughts were to fix for 5 or 10 years asap OR look at how trackers work as option 2. I am not good a risk and prefer not to invest as a means of securing my home/lifestyle in retirement and hope to use any surpluss that I can afford to lose, for that instead.

Too much at stake, but good luck to those that can!

Thanks for you help.

jamesd

Thrugelmir wrote: »

Maybe that's because mortgage lending lending is secured whereas P2P isn't.

P2P usually is secured, and the security is often on houses and flats, thought that does depend on the specific P2P place being used. Others have various forms of protection fund that aim to cover the inevitable default cases, so far always successfully in the UK businesses. Here's a summary of the security/protection of some that are mentioned by a comparison site and one other:

Buy2letcars: secured on cars, 9-14%
rebuildingsociety: secured on buildings, 13-18%
eMoneyUnion: unsecured, provision fund, 10-12%
assetz: secured often on buildings, 7-13%
Saving Stream: secured on buildings, maybe 12%
FundingSecure: secured on anything a pawn broker might take, from watches to boats
FundingEmpire: secured on vans, trucks, machinery, 12-13%
ThinCats: secured, 10-11%
FundingCircle: unsecured to businesses
RateSetter: unsecured, protection fund, 8-13%
Landbay: secured on homes, 4.4%
Wellesley: secured on property, 4.08%
LendingWorks: default insurance, 4%
Zopa: protection fund, 4%
Madiston: looks like unsecured with no protection fund
Ablerate: secured on planes, plant and such, 10-12%

jamesd

Jhoney wrote: »

I am not good a risk and prefer not to invest as a means of securing my home/lifestyle in retirement and hope to use any surpluss that I can afford to lose, for that instead.

Too much at stake, but good luck to those that can!

I don't know your age but lets look at the difference between investing and not investing in retirement planning, I'll assume that you're 30 years old and reach state pension age in 38 years and want £10,000 income on top of the state pension, in today's money, which takes a pension pot of around £250,000 in today's money.

Monthly cost, investing: 208 including tax relief

Monthly cost, not investing: more than 550, the calculator wouldn't let me use a -1% real (meaning after inflation) interest rate so I used 0 instead.

If you don't want to invest it'll end up costing you something like five to ten times as much money to get the same retirement income. That's possible but it's a really expensive choice to make. Though you do have he alternative of looking for jobs in the public sector, where defined benefit pensions are still available, at least for now.

Looking back since 1899 there were 95 18 year periods. In 94 of those if a lump sum was invested once at the start investing beat cash (page 69 of 2012 Equity Gilt Study). Over 23 years there were no periods where the equity investing produced less than a positive result after inflation (page 68 Figure 7).

katejo

silvercar wrote: »

Found it.

Article from a year ago:

http://www.thisismoney.co.uk/money/news/article-2572183/Five-years-0-5-rates-What-meant-borrowers-savers.html

The juicy bit:

I have one similar to this. I switched from a fixed rate to a Woolwich base rate tracker at the beginning of 2008. I have had a 0.77% since March 2009 (base rate plus 0.27%). wonderful for overpayments and funding a new kitchen!

Thrugelmir

jamesd wrote: »

P2P usually is secured, and the security is often on houses and flats, thought that does depend on the specific P2P place being used. Others have various forms of protection fund that aim to cover the inevitable default cases, so far always successfully in the UK businesses. Here's a summary of the security/protection of some that are mentioned by a comparison site and one other:

Buy2letcars: secured on cars, 9-14%
rebuildingsociety: secured on buildings, 13-18%
eMoneyUnion: unsecured, provision fund, 10-12%
assetz: secured often on buildings, 7-13%
Saving Stream: secured on buildings, maybe 12%
FundingSecure: secured on anything a pawn broker might take, from watches to boats
FundingEmpire: secured on vans, trucks, machinery, 12-13%
ThinCats: secured, 10-11%
FundingCircle: unsecured to businesses
RateSetter: unsecured, protection fund, 8-13%
Landbay: secured on homes, 4.4%
Wellesley: secured on property, 4.08%
LendingWorks: default insurance, 4%
Zopa: protection fund, 4%
Madiston: looks like unsecured with no protection fund
Ablerate: secured on planes, plant and such, 10-12%

I think where we differ in opinion is that I spent some years in SME's during my working life time. In particular start up's raising Venture Capital at the ground floor. So I take a far more cautious view when it comes to company finance. There's plenty of angel investors with money that they are prepared to risk and lose. By this I mean 6 figure sums. My concern is the constant pumping of the how great the returns are on other forms of investment. That's how "investments" get mis-sold. There's no harm in being cautious which the vast majority of people should. Once you've lost capital very difficult to rebuild again.