Remortgage or hold out

rugbyant

Help please,

We have a great mortgage deal at present .99% above base rate. So we are on 1.49% variable. Our previous fix ended 5 years ago and we've been on this since. £140k left, house estimate £200-£220k.

New EU policy makes me wonder whether to go for one of the 10 year fixed deals 3.4%. We have around 70 LTV. We would pass eligibility criteria for this, but if you add the 6-7% the EU want to - it may not be the case.

Base rate is supposed to stay low for another 2-3 years.

Thoughts?? Anyone think the EU policy will be overturned?

Thanks,

Thrugelmir

We would pass eligibility criteria for this, but if you add the 6-7% the EU want to - it may not be the case.

What potential EU policy are referring to?

rugbyant

From Martin Lewis .... the new EU 'Mortgage Credit Directive' won't allow lenders to waive affordability checks. It officially starts in March 2016, but can be brought in from Sep. While the EU has given us some good financial protection, this is bonkers and needs reversing.

rugbyant

Help - anyone??

kingstreet

Lenders have never chosen to use the MMR transitional arrangements and have always applied affordability checks, so you are unlikely to be affected by the withdrawal of something which has never actually been implemented.

rugbyant

I understand what you have said, but I thought the EU are now forcing the matter and March next year it HAS to be used. So although lenders could choose not to use, next year they'll have no option.

I can't add links, but if you search the main ML site for "EU mortgage rules", the number 1 hit explains more.

mark55man

I made that decision 10 years ago. My thinking was similar - and wrong (=costly).

You will be paying 1.5% more on your mortgage to start with
The next few rises (IMHO) will be 1/2 a % here or there. - Maybe 1/2% a year starting 2016

So by the time you get to when the monthly payments from current mortgage = your proposed 10 year fix you will have made significant savings that only a seriously rapid (and seriously unlikely) rate increase will undo.

My suggestion is that you either overpay the difference between the two rates into
your mortgage from now, OR pay it into one of the current 4% accounts if that's tax efficient for you

Although people say how can interest rates go down from 0.5% - what is important for you is the longer term rates of 10 and 30 year financial instruments (which are currently % for 30 year US treasury/UK gilt bonds). This yield curve is flattening and flattening meaning that will take a while for long term cost of money to come back t where long term fixes will become significantly more expensive. so I think you will have a long time to spot the cost of a long term fix rising and can act then.

if, for example it took 5 years for the two rates to match, at that point you would only need a 5 year fix (which would be on a lower rate than 10 years) to match your current profile. You should do some spreadsheets to work out what the relative costs would be under different interest rate profiles

Finally as I understand affordability checks surely they wont apply to mortgages you already have

kingstreet

rugbyant wrote: »

I understand what you have said, but I thought the EU are now forcing the matter and March next year it HAS to be used. So although lenders could choose not to use, next year they'll have no option.

I can't add links, but if you search the main ML site for "EU mortgage rules", the number 1 hit explains more.

I know what the European Mortgage Directive says and so far, the only lender which will be affected by this is Ipswich Building Society as it is the only one actively using the transitional arrangements which the directive will prevent.

Any lender which isn't using them since the opportunity started on 26 October 2012, isn't going to start now knowing it won't be possible for very long.

It simply won't make sense.

Thrugelmir

rugbyant wrote: »

From Martin Lewis .... the new EU 'Mortgage Credit Directive' won't allow lenders to waive affordability checks. It officially starts in March 2016, but can be brought in from Sep. While the EU has given us some good financial protection, this is bonkers and needs reversing.

Waiving affordability checks benefits no one. What was bonkers was the light touch regulation that was allowed for many years. That has created many of the the problems faced today. The industry is at a turning point. As it's mutual lenders that are increasing market share of new business. While the commercial entities focus on profitable activities.

dimbo61

So you were on a fix that ended 5 years ago and your monthly mortgage payment dropped ?
What did you do with the money each month ?
Have you overpaid your mortgage at any time since you took it out ?
OLD phrase Make Hay while the sun shines
The very best (safe) return you can get is overpaying your mortgage.

rugbyant

Yes we overpaid each month during this period.