To fix or not to fix...

pjbennett

Hello

I am in a quandary and am hoping that someone out there may be significantly better at maths than I am!

I have been on Nationwide's BMR for some time now. It sits at 2% above the base rate and I am allowed to make unlimited over payments. I am also entitled to access all or some of the value of the overpayments via a borrowback facility without incurring any charges. I have made overpayments to the mortgage rather than having a savings account as the interest saved outweighed the interest gained in a bank account. Plus, I get a kick out of seeing my mortgage slowly vanish. The mortgage is interest only, so if I have other financial priorities during a particular month, I only pay the interest and during months where I am more flush I make overpayments.

I have paid off £53,000 over the last 9 years and the remaining mortgage is £30,000.

Yesterday's Telegraph predicts a rate rise between July and September next year so I have been considering my options. There are fixed rate deals out there at under 2% but the arrangement fees seem to negate any benefit. Also the SVRs are nearer 4% with many lenders, so when I came out of the fixed rate I would be on a worse deal. However, hopefully at that time there would be other decent fixed offers available to switch to. However, arrangement fees may dilute any benefit.

What I am struggling to calculate is which option ends up with the least dead money i.e. interest and fees but am struggling with the maths particularly as no one has a crystal ball regarding future rate rises. I also appreciate the flexibility of my current mortgage however cash in my pocket is always preferable to interest going into someone else's. 0% credit cards are also more efficient than the borrow back facility, so maybe I'm overdoing the flexibility bit!

Apologies for thinking out load and dumping the contents of my brain but I am going round in a circle and hopefully someone may be able to set me straight.

Many thanks in advance.

SSST

I'm looking for the same advice....

Subbed for responses

kingstreet

Arrangement/product fees suit larger mortgages where there is scope to "recover" the fee cost by saving on interest.

Smaller mortgages should avoid fees and where possible get fee-free and/or cashback.

A mortgage of £30k means +/- £25 a month for every 1% change in the rate. How much will rates change in the next few years? Probably not by much.

I would think very carefully before I gave up a Base + 2% Tracker.

getmore4less

£30k mortgage on Base+2% it will be really hard to recover any fees.

any short term fix will not really work as well as changing lender will probably mean going repayment.

You don't say the term but lets go with 10y to do a comparison.

£30k 2.5% over 10years £283pm. in 2 years owe £24580
rate needed to recover fees on a 2y fix.
£000 2.50%
£100 2.31%
£200 2.13%
£300 1.94%

it might be worth looking at for a long term fix to take out any uncertainty.

if you can maintain the same average rate the last 9 years(£611pm) you will have paid it off in 52 months so a 5year fix may be an option.

if you got a 5y fix at 2.5% or less and no/low fees 533pm.

if you stayed on the variable and rates went up to day by 1% it would cost you £800 more over 5 years(asuming you overpay your interest only at roughly a repayment schedule.

you give up a lot of flexability(and a overpayment pot), for certainty

getmore4less

0% credit cards are also more efficient than the borrow back facility, so maybe I'm overdoing the flexibility bit

have a read up on stoozing, you could probably trim some interest with a low fee BT card or a purchase card(no fees) to carry the ballance if you have the cash flow/borrow back facility.

pjbennett

Thanks for all the great advice. Food for thought on a Sunday afternoon!