Been accepted by first direct but want something cheaper

mardymorris

Hi all,

I am a first time buyer along with my wife. We have been accepted for first direct and are putting down a 10% deposit. I know there are much better deals out there but don't really understand it all.

Fixed or variable? Obviously with the interest rates so low and yesterdays news that they might be dropping further is it better to have a discounted variable?

Would anyone recommend using a mortgage broker? I seem to think they might not give the best deals for me because they might get better commission elsewhere.

We are putting down £13000 on the deposit and have £20000 in savings (including the deposit). We have been renting for the last five years and would need to buy some other furnishings so we would like to keep a fair amount for that.

With lenders like loughborough building society is there stricter criteria? Has anyone had any dealings with them?

Any help would be much appreciated.

ACG

First Direct are unlikely to be expensive, they may not be the cheapest but they are probably not going to be far off.

If you go for a tracker/discounted rate you may benefit from any reducations in rates but you will also encounter higher rates if rates rise - is it worth the risk?

Brokers can be invaluable. We will rectify any issues, we search the market to get you a decent rate. Being accepted for a decision in principle is not the same as an offer (read these forums for peoples experiences).

Brokers are not allowed to chose a lender that pays higher commission but that to one side - the commission paid is pretty much the same across the board. There are some exceptions but the difference is usually negligible - usually £300-350 per every £100k so on a mortgage of £187k you are talking less than £100 difference... I would not risk my license for £100.

mgfvvc

When I got my current mortgage I told the estate agents' mortgage broker we were looking at a 5 year fix from FD. He said he wouldn't waste our time because he knew he couldn't beat it.

I would suggest fixing for at least 5 years. A variable rate exposes you to a small potential gain, but artes can't drop much further, but in the long run rates could rise a lot. Could you cope if rates doubled?

ACG

mgfvvc wrote: »

I would suggest fixing for at least 5 years.

Are you basing your suggestion on this:

A variable rate exposes you to a small potential gain, but artes can't drop much further, but in the long run rates could rise a lot. Could you cope if rates doubled?

?

Im not trying to "big up" our job but what you are doing with very limited information is potential quite damaging for the OP.

You could well be spot up, but you could end up costing them thousands by not knowing the full story.

A lot has changed since you bought your house I think. HSBC/FD were kicking !!! in rates they offered - although at the same time they were cherry picking who they wanted to lend to. Since then a lot has changed, other lenders have caught up with FD/HSBC and in certain scenarios they can be bettered.

amnblog

The good news is that the FCA wont be knocking on mgfvvc 's door.


We are not so lucky ACG.

marathonic

mgfvvc wrote: »

I would suggest fixing for at least 5 years. A variable rate exposes you to a small potential gain?

These rates have no fees:

90% LTV First Direct 5 year fix: 4.39%
90% LTV First Direct 2 year fix: 3.69%

75% LTV First Direct 3 year fix for existing customers: 2.49%


If rates were to stand as they are and property prices were to rise at similar rates to recent times, which is probably unlikely but possible, a 2 year fix would save 0.7% per year for two years and your subsequent 3 year fix would save 1.9% per year for three. This is hardly a 'small potential gain'.

Mortgages are a minefield but, unless someones finances were extremely tight, I wouldn't recommend a long-term fix for someone on a 90% LTV. I'd get the LTV down to 75% before even considering it.

The above is especially true for First Direct with their SVR of 3.69% - if property prices happened to fall or personal circumstances were to change, it's about the best SVR available to be stuck on.

Thrugelmir

mardymorris wrote: »

Obviously with the interest rates so low and yesterdays news that they might be dropping further is it better to have a discounted variable?

Lenders still have to make a margin. As have costs to cover. Before earning a profit. Savers aren't going to deposit money at negative rates of interest either. Don't confuse Central Bank policy with what might happen commercially.

mardymorris

ACG wrote: »

Brokers can be invaluable. We will rectify any issues, we search the market to get you a decent rate. Being accepted for a decision in principle is not the same as an offer (read these forums for peoples experiences).

Even after the credit check?

ACG

You have passed a credit check - your bank statements, pay slips, income and expenditure, the property, your deposit etc have not been assessed yet.

You might think oh there will be no issues there and you could be correct but in 2014 a few issues that were unexpected that cropped up:
2 x properties had gardens bigger than that which were on the land registry (basically the current owners had taken land from someone else) - im in Manchester so its not like its the countryside and its easy to misplace a few foot of fields, these were peoples back gardens).
1 x client who was given 4 DIPs and then failed at application stage for varying reasons.
1 x lender just deciding they did no like the client after DIP and then declining at application stage for no other reason than they did not like the application.

Im not trying to scare you at all - the reason I can remember them is because they were the few issues I had in a full year. The point im making is that a credit check is just that. There has been no underwriters assessment at this stage.

You have passed the first hurdle, which is great. But there are a few more yet.

mgfvvc

marathonic wrote: »

These rates have no fees:
If rates were to stand as they are and property prices were to rise at similar rates to recent times, which is probably unlikely but possible, a 2 year fix would save 0.7% per year for two years and your subsequent 3 year fix would save 1.9% per year for three. This is hardly a 'small potential gain'.

That's fair enough. While the basic point that a doubling of rates, or worse, is possible, that's a bigger spread of rates than I expected.

It's a good job you guys are paying more attention.