Mortgage Express won't let me switch to a repayment mortgage.

ChaosGun

Hi, I need some advice.

I recetly contacted Mortgage Express to swich my interest only mortgage over to a repayment mortgage. After going through a 1hr conversation where i gave details on my income and outgoings I was told that the switch could not be done as there was a risk that should the interest rate increase to 5% (approx) the monthly amount would not be affordable for me, despite the fact that i have almost 20k in savings and the fact that i would still have a surplus of £150 - 200 disposable income every month. Is this normal? Its highly unlikely the the interest rate will ever go up to such a rate. Are they just trying to keep on an interest only mortgage so that they can make a hugh profit on the capital at the end of my term (currently 21 years). Many Thanks

Thrugelmir

ChaosGun wrote: »

Its highly unlikely the the interest rate will ever go up to such a rate.

Before the GFC base rate alone was 5%. So unsure why you believe interest rates are going to remain indefinately low.

There's nothing to stop you making overpayments on your mortgage now.

dunstonh

Its highly unlikely the the interest rate will ever go up to such a rate.

Oh dear. Naivety of the young. Less than 10 years ago rates were higher than 5%. Many posters here will recall the days of 15%.

They do have to make sure the mortgage is affordable at a higher rate.

Easy solution is to make overpayments and effectively turn it into a repayment mortgage that way.

maninthestreet

how much more is the monthly payment for the repayment mortgage compared to the IO mortgage?

ACG

Can you overpay on your mortgage?
Just make overpayments and it will naturally bring the balance down.

ChaosGun

maninthestreet wrote: »

how much more is the monthly payment for the repayment mortgage compared to the IO mortgage?

Hi, i'm currently paying £401 per month, interest only, the said that the monthly repayment mortgage could go up to 1200-1300 per month (approx). My income is £2000 per month approx.

dunstonh

ChaosGun wrote: »

Hi, i'm currently paying £401 per month, interest only, the said that the monthly repayment mortgage could go up to 1200-1300 per month (approx). My income is £2000 per month approx.

At £1200 you would be well above the recommended 1/3rd (which is just a broad sensible level not to exceed). So, you can see why they didnt like it. Hence why overpayments are likely to be easier for you to put through.

ed67812

ChaosGun wrote: »

Are they just trying to keep on an interest only mortgage so that they can make a hugh profit on the capital at the end of my term (currently 21 years).

You've lost me. How do they make a profit on the capital. If you borrow £100,000. You owe £100,000 in 21 years. Yes they make money from the interest over this period but you will get the benefit in any inflation over this period (obviously assuming wages grow with prices). Do you fully understand how interest only mortgages work?

ChaosGun wrote: »

said that the monthly repayment mortgage could go up to 1200-1300 per month (approx). My income is £2000 per month approx.

Sorry, but I have absolutely every sympathy with those calculations. I personally don't think that a 5% interest rate is likely in the next decade (but that is a best guess). Lenders have to factor in affordability; they didn't in the past and look what happened.

As has been said, if you can; make overpayments!

getmore4less

IF you think you can afford it just overpay,

Then if you can't you stop overpaying.

once on repayment you won't have that option.

The don't make money out of you at the end you just give them the same money back as you borrowed, they make it all along if you don't pay off the capital.

In case you don't have it yet,

just overpay what you can afford.

Thrugelmir

ed67812 wrote: »

I personally don't think that a 5% interest rate is likely in the next decade (but that is a best guess).

I suspect views such as yours concern the BOE at the current time. Hence the likelihood of small incremental increases. Nor are lending interest rates determined purely by Central Bank rates. Other factors determine the actual rates charged.

ed67812

Thrugelmir wrote: »

I suspect views such as yours concern the BOE at the current time. Hence the likelihood of small incremental increases. Nor are lending interest rates determined purely by Central Bank rates. Other factors determine the actual rates charged.

I get ya, but I'm still personally not convinced rates will go up that much. Not given the current lack of inflationary pressures. The bank just indicating rates may go up cools the market. Plus, whatever one thinks of BoE / Government relationship; any sitting government on whose watch rates rise to this level, would be booted by the electorate - it will not be allowed to happen.

That being said, I have decided recently to not move in case rates go up more than I think they will.