10 year fixed or 2 year offset tracker at lower rate

Greylady73

Anyone got any advice?

We're hoping to pay off our mortgage in the next 10 years.

We can hopefully get a 10 year fixed at 2.89 no fees. However, we currently have an offset mortgage which if we give up we won't be able to get again to new income levels required.

The offset is 1.49 above base rate for two years, so currently 1.99 which would save us £145 a month. We don't intend to move. I just don't know what to do. We use our childrens savings to offset against the mortgage as their rate of interest would be so low but at some point in the next 10 years these would need to be given to them.

Thanks

MortgageMamma

The way I would look at this is

1. how important is it to you to pay off your mortgage in 10 years
2. how important is it to you to save the £145 a month
3. what is the reversionary rate when the fixed deal ends on the offset
4. how many charges will be added to the loan if you go for the 10 year fix
5. If you took the 10 year fix out of the picture, what would you do at the end of the offset?
6. Who has told you that you won't be able to get the offset rate again due to new income levels required? It would be useful to know who the lender is, as if you are whats termed a "mortgage prisoner" there may be transitional arrangements available to ensure you receive a new rate

MM

Greylady73

Thanks for your reply.

Our lender is First Direct. It is really important that we try to pay our mortgage off in 10 years and on the 10 year fixed rate this would be achievable.

After the 2 years offset we would be put back on the SVR which is currently 3.69.

I don't know of any charges to the fixed rate other than the redemption charges for ending it early.

At the end of the offset I would probably look for a fixed rate of some sort depending what the SVR was at that time.

First Direct now state to get an offset mortgage you need a combined salary of £70,000 or single salary of one of you of £50,000 - never of which we would qualify for.

It's not so much saving the £145 each month as I would just use any savings to overpay on the mortgage, I just want to pay it off as quickly as possible, paying as little as possible.

Thanks

Thrugelmir

The 10 year fixed rate gives you certainty that the mortgage will be repaid along with the amount that it will cost you. With any other options there's too many what if's.

The alternative option is remain as you are. While interest rates remain low overpay the mortgage by as much as you able. While interest rates may rise. The amount you owe is actually a far more important factor in the decision longer term.

Kodagirl

I just rang up to enquire about a 10 year fixed rate mortgage, moving my existing one from NRAM, didn't realise you needed a bank account with them though. �� Back to the drawing board.