Twist or Stick?: fix it or continue riding the variable rate?

sthomas150_2

Firstly many thanks for taking the time to read this epic - any advice is always very gratefully appreciated

Here is where I am currently:
Residential house valued @ £250,000, owing £150,000; LTV of 60%
Woolwich
Mortgage 1 £55,000 –variable 0.95% above Barclays Base Rate (currently 1.45%)~£200/month
Mortgage 2 £25,000 – variable 1.49% above Barclays Base Rate (currently 1.99%)~100/month
Mortgage 3 £70,000 – fixed @ 2.3% until 31st December 2015 (then 3.39%+BR) ~£300/month

I’m currently paying approx. £600 a month and making £400/month overpayments.
I have the Santander 123 account with £20,000 earning 3% (~£50 each month with interest and cashback)

With the ‘Mortgage 3’ Woolwich 2yr fixed rate due to end on December the 31st what shall I do?

Option 1 – Fix for long term
the rates now are so low isn’t now the best time to fix for as long as possible? Flexibility if lost however if I need to move house/divorce etc

*10 year fixed with Woolwich @ 2.99% with £999 fee
*10 year fixed with TSB @3.14 (but only locked in for 5 years) , no fee but £275 deeds release fee from the Woolwich+ valuation cost

Option 2 – fix for shorter term (5 years or under)
A lower rate is better but I’ll no doubt be begging for advice in 5 years’ time!
*5yr fix with Woolwich @ 2.39%+995 Fee
*5yr fix with Chealsea BS @ 2.14%+£1545 Fee+ deeds release fee+ valuation cost
*5yr fix with Yorkshire BS (or Santander) 2.18% + £845 fee (Santander £995)+ £275 deeds release fee+ valuation cost

Would anyone recommend a short term fix at a low rate?

Option 3 - both!
I could potentially fix Mortgage 3 which reverts to a high rate (3.39%+BR) to one of the fixed terms above and leave the Mortgage 1 0.95%+ BR on the variable rate? Or both Mortgage 1 and Mortgage 2 on the variable rate?

I figure that I’ll never be able to get this extremely low variable rate ever again so I should make the most of it, even though it will only ever get worse? If it ever starts looking terrible I can fix it before it gets above the ~4% mark

I realise I havn’t discussed what these mortgages revert to which is a factor but for now I’ll just focus on the fixed %.

I appreciate any and all of your input

Thanks all

Thrugelmir

Option 3. Leave 1 and 2 as is.

Focus on Mortgage 3. Closer the time taking the best option available.

bownyboy

I'm also starting to wonder about fixing too. Currently on Santander lifetime tracker at BOE +1.99% but have seen they do a 5 year fix at 2.19. The sting is the £1,495 fee.

Just ready an article this morning in the torygraph countering the interest rates wil go up slowly mantra...

getmore4less

M1 base+0.95% is a long term keeper.
paying min payment on longest term you can even consider extending it but Barclays charge for that.

You will always(IMO) be able to save at a better rate, if rates go up so will savings rates

M2 base+1.49% is cheap and small enough not to worry about to much so treat like M1.

It is likely that there will be savings option that track with it close enough to make it work keeping

M3, this is the bit that need work,

All spare money should be aimed at this,
as overpayments or saved till the penalty free period is over or a better(net) rate is possible.

Plan to move this which will mean sticking with a Woolwich retention offers.

with a net amount if you use savings under £50k fees need to be factored into calcs.

by Dec things may have changed but there are a few options for M3

lifetime tracker at base+1.99% with a 2y discount to B+0.89 £999 fee

a few fixed at ok rates but not market leaders.

£70k paying around £300pm + £400pm and having £20k this can be paid off in less than 7years so a 5y fix fits nicely, 10y would be too long unless you can save(net) at a higher rate than the fix rate.

(with all 3 current deals you probably should be using savings rather than overpay when/if rates rise then savings rates will go up as well)

sthomas150_2

Prompt replies very much appreciated.

yes I hope to be able to arrange the next product with Woolwich in August as rates may be worse come December. Im not certain if I can do this now, though i know it used to be possible?

I must admit I had only been looking at fixed rate deals, not the lifetime trackers. I think the offer you noted is excellent, especially for the first two years and reverting to B+1.99% seems acceptable and on a par with the the two existing products I have. However, it just feels like I would be missing a trick not to fix for longer?

My current products are portable and we've just moved house anyway so don't foresee this in the near future anyway (I realise there are other reasons against a long term fix however).

If I continue to pay 10% of the remaining debt then it should be paid off after around 12 years. I presume you calculated I can pay off £7000 annually, which I don't think is the case as the total debt is decreasing?

I think the woolwich 10 year fixed is a best buy but @ 2.99% +£999 it isn't great. Plus I can then only overpay 5% annually

dimbo61

Can you overpay by 10% on the 5 year fix ?
That is a good rate and if you can afford the £400/500 a month overpayments with a Top up come December to make the full 10% each year.( out of savings )
If the BOE base rate does rise then overpay the tracker part if more than 2.39%
Check with the woolwich when you can book the new deal.
In five years with overpayments and savings you could be in a strong position if rates have risen

Pincher

Yes, the one where they find 90% were mis-sold to businesses.
BOE interest rate went down, so instead of saving the businesses money, it cost them even more.


Now, with BOE at 0.5%, it can only go down by 0.5%, but the upside is what you want to hedge for. The only thing is, who will be the idiot who will write a contract where they pay you if interest rate goes up.


The only way it will work is if they rig it so they don't pay out until BOE is above say 2.5%. You still pay while the BOE is below 2.5%.


If there is a banker doing an interest rate swap where I pay nothing if BOE stays at 0.5%, but pays out when it goes up, I want to know, please.

sthomas150_2

Bimbo- yes the 5 yr fixed I can overpay 10% but the 10 yr fixed I can only overpay by 5%
UPDATE: woolwich products have worsened- 5yr fixed is now 2.59%, 10yr fixed now 3.25%��

do you think this changes anything? best 5yr fixed rate on the market is still 2.14% (Chealsea BS) do you think it's worth sacraficing my low variable rates+ paying extra fees to get this low rate or do you think it doesn't change anything?

woolwich 3yr fixed is 1.99%- would this interest any of you?

Thanks all

dimbo61

At the end of the day you OWE £150,000 and unless you can overpay big style each month/year then costs are going to go up in the next few years.
You are making overpayments of £400 a month and have £20,000 in savings which you could use to reduce the mortgage IF mortgage rates climb above savings rates
Your call if you take the 3 year deal with Woolwich and overpay which ever part of your mortgage has the highest interest rate each month