Northen Rock cashback Mortgage Rates Really High Yikes!!!!!

formidablelady

Well thank you for your input. I guess I can't have my cake and eat it after all. It dosen't sound as if I should even waste a phone call.

dunstonh

Cashback mortgages generally have a 1% penalty for every 1% they give in cashback. i.e. a 5% cashback would have had a 5 year tie in with a 5% penalty in year one reducing by 1% a year until end of year 5.

Lenders dont give money up front without having the ability to make you pay it back if you leave them within the tie in.

Gorgeous_George

MarkyMarkD wrote: »

As I have said before, I doubt very much that NR have priced this so it's economic to redeem early. They are not stupid.

Their share price may suggest otherwise

GG

MarkyMarkD

formidablelady wrote: »

Well thank you for your input. I guess I can't have my cake and eat it after all. It dosen't sound as if I should even waste a phone call.

You can read your penalty terms from your mortgage offer/KFI, and then decide if it's worth redeeming early or not. But it's not worth phoning up if you thing you're going to succeed in "trying it on".

MarkyMarkD

Gorgeous_George wrote: »

Their share price may suggest otherwise

GG

OK - let me rephrase that! They are not stupid in their product design. They were stupid in their funding strategy and exceptionally arrogant in continuing a high level of net lending with no realistic way of funding it.

They could very easily have averted their funding problems by stopping lending and, in particular, stopping letting customers switch product (which would have led them to redeem very rapidly eliminating the funding problem).

Conrad

Formidable, some might consider the 'penalty' as merely returning the cashback, so not really a penalty.

Remortgaging might give you a lower fixed rate, BUT if you owe more than the property is worth the options are limited.

formidablelady

The concensus seems to be that I shouldn't bother trying to see if they will reduce my rate a little. Conrad my house is worth £360000, mortgage is £220000. I was hoping that someone may have already tried to re-negotiate and could let me know how they got on.

dunstonh

The fee in question though isnt something you can haggle and its not something that "could" be considered unfair. It is an acceptable contract event.

They gave you a sizeable cashback and need to protect themselves if you try and move or change the mortgage.

If you want to alter your rate, then you will have to pay the early repayment charge in full.

Gorgeous_George

Depends what the penalties are for switching lenders.

NR are highly unlikely to reduce the rate on your current mortgage product. Switching to another lender could achieve a better long term rate. On a £220K borrowing it may be worth paying the penalty and switching to a Base Rate Tracker or 10/25 year fixed rate.

Switching to a tracker or fixed rate should save you £16K over the next 7 years. If the redemption penalty is less than that it is worth switching. I suggest you find one without an extended tie-in.



GG