Remortgaging - keep term or extend 25yrs?

Jimmar

If rates go up I would have been in a bind on my old tracker too but at least now they can go up by 1% before I will be worse off. I wouldn't really be able to run away from rate rises even on a fixed rate. My first mortgage was a 2yr fix and when it ended I was faced with huge SVR and had to choose from pretty unattractive available rates.

Jimmar

Also taking a gamble that if base rate goes up then savings rate will inch up too.

Thrugelmir

Jimmar wrote: »

Also taking a gamble that if base rate goes up then savings rate will inch up too.

Once rates eventually normalise they'll be a clear differential between savings rates and loan rates. Though I wouldn't expect to see this any time soon. BOE base rate will have to be in the 3.5% - 5.5% range to be considered normal.

ViolaLass

Thrugelmir wrote: »

If rates go up. Then the OP will have less to overpay with.

Eh? If rates go up, the OP will have whatever amount they saved. That amount won't diminish if rates go up.

Your argument that one should overpay more when interest rates are low doesn't follow. Should one overpay less when rates are high?

Thrugelmir

ViolaLass wrote: »

Your argument that one should overpay more when interest rates are low doesn't follow. Should one overpay less when rates are high?

As and when interest rates incrementally rise so then will the standard mortgage amount. This will reduce the amount of free cash that's available to overpay with. In effect more cash every money will be spent in debt servicing i.e. paying interest than repaying capital owed. Reducing the capital balance owed is the key. More so than simply chasing rates.

Jimmar

I'm working on the interest rate on my debt currently being lower than that on my savings so I'm earning more in interest on savings than I would lose on interest for the equivalent portion of debt. The difference might only be in the 10s of pounds over a year but it would be better to keep those assets liquid for the short term because once I've paid them into the mortgage they are pretty much lost.
Of course if rates started rising and there was a situation where savings rates couldn't compete with my mortgage rate then I would have to consider paying down the capital debt - but that isn't the case currently.

Jimmar

Thrugelmir wrote: »

If rates go up. Then the OP will have less to overpay with.

If my saving rate stays higher won't I have a tiny amount more to overpay with?

ViolaLass

Thrugelmir wrote: »

As and when interest rates incrementally rise so then will the standard mortgage amount. This will reduce the amount of free cash that's available to overpay with.

The easy answer to that is to overpay when rates rise. Why pay any earlier? And if savings v mortgage rates are still in your favour, why overpay even then?