Mortgage worries - amount? variable or fixed? 2, 3 or 5 year?

Parisian

I have just had an offer accepted on a new build one bedroom flat in the outer London area.

- The flat is £307,500 and the parking space is £15,000 - total is £322,500
- My salary is £48,000
- My total savings are around £125,000
- I have some outgoings that add up - pension, student loan, car finance, professional memberships (just short of £1500 a year for these), dental plan, mobile, pet insurance for my cat etc.
- I have credit cards and pay them off in full each month.
- I will likely stay put for at least 4 years as I have 4 years left of my employment contract
- The only reason I would move earlier is if my life circumstances change - marriage etc, nothing is on the cards but of course anything is possible as a female in my early thirties

I spoke to a broker at London & Country and he told me:
- He recommended a 5 year fixed mortgage.
- He wasn't taking into account all of my outgoings I mention above, just some of them as I did not have them all to hand.
- He was struggling to find me a mortgage at 75% LTV
- He could get me something at around 72-73% LTV, but with a 35 year term
- He recommends a 5 year fix and says 2 year fixes are around 1.5-1.9%, 3 year fixes are 1.8-1.9%, and 5 year fixes are 2.1-2.2%
- He was putting the pressure on to make a quick decision.

I asked him to talk me through things a bit more but to be honest he wasn't the most helpful. I am going to my reservation appointment tomorrow and I'm still not clear what amount of mortgage I can get, which is worrying. I feel it's a bit risky reserving a property without knowing I can definitely get at least £215k.

My questions are:

In the current economic climate, would a fixed or variable mortgage be recommended?
Is the base rate likely to increase or possibly decrease to zero?
Is fixing for 5 years a good idea?

I am finding it hard to decide without really understanding this whole base rate issue and whether I should be trying to fix in for a long period, or taking more of a risk.

Any thoughts or advice would be really appreciated...!

csgohan4

That is the issue with free conveyor belt broker's, they care only the volume, not the service they provide.


Whether 5 years or 2 years will depend on your circumstances, whether you want to sell in the next few years or be reassured by the fact you know how much you need to pay for the next 5 years.


You can still overpay as well which reduces the interest your charged.

amnblog

It sounds like you are not getting the service you want, in terms of patience, attention to detail, and guidance.

Allow no credit scores with L & C and consult another broker.

getmore4less

What do you think you can afford?

Do a real cash flow analysis to identify how much your realistic mortgage payment can be.

This will determine the amount/term profile for various rates.

If you have an idea of future income you can assess how close to maxed out you want to go.

muhandis

In your place, I would find another broker before reserving this flat.

From experience, there is no dearth of decent mortgage broker firms in London. Given the information you have on the property you are looking at, the very least you would expect from a half-decent broker is him/her being able to tell you what you can borrow.

Parisian wrote: »

I have just had an offer accepted on a new build one bedroom flat in the outer London area.

- The flat is £307,500 and the parking space is £15,000 - total is £322,500
- My salary is £48,000
- My total savings are around £125,000
- I have some outgoings that add up - pension, student loan, car finance, professional memberships (just short of £1500 a year for these), dental plan, mobile, pet insurance for my cat etc.
- I have credit cards and pay them off in full each month.
- I will likely stay put for at least 4 years as I have 4 years left of my employment contract
- The only reason I would move earlier is if my life circumstances change - marriage etc, nothing is on the cards but of course anything is possible as a female in my early thirties

I spoke to a broker at London & Country and he told me:
- He recommended a 5 year fixed mortgage.
- He wasn't taking into account all of my outgoings I mention above, just some of them as I did not have them all to hand.
- He was struggling to find me a mortgage at 75% LTV
- He could get me something at around 72-73% LTV, but with a 35 year term
- He recommends a 5 year fix and says 2 year fixes are around 1.5-1.9%, 3 year fixes are 1.8-1.9%, and 5 year fixes are 2.1-2.2%
- He was putting the pressure on to make a quick decision.

I asked him to talk me through things a bit more but to be honest he wasn't the most helpful. I am going to my reservation appointment tomorrow and I'm still not clear what amount of mortgage I can get, which is worrying. I feel it's a bit risky reserving a property without knowing I can definitely get at least £215k.

My questions are:

In the current economic climate, would a fixed or variable mortgage be recommended?
Is the base rate likely to increase or possibly decrease to zero?
Is fixing for 5 years a good idea?

I am finding it hard to decide without really understanding this whole base rate issue and whether I should be trying to fix in for a long period, or taking more of a risk.

Any thoughts or advice would be really appreciated...!

GreatApe

You could go directly to a bank and book an appointment they tend to sit down with you for about 2 hours and go through it all and can say exactly how much they will lend.

dimbo61

This is a big decision and getting help/advice from a professional would be both wise and save you time and money.
You will be using a solicitor for the legal side and a RICS surveyor to survey the property so why not a Whole of Market Mortgage Broker.
I tried L & C who were helpful but my mortgage was complex and they quickly lost interest.
Sitting down with an expert who can search the market and who knows which lender does 4.5 times income to first time buyers with 25% deposit.
Your local bank/building society will only have the products they SELL !
You need a FULL fact find to establish how much you can afford and what type of mortgage. Fixed, offset, tracker, etc