Nationwide product switch query

muhandis

Hi,

I booked a non-advised product switch a few days ago to start on Oct 1 and received confirmation. The rate was 1.24% for a 2 year fix for a loan amount of £265k.

I now see that the rate for this product has gone down to 1.19%. When I called NW to cancel the switch and change to the new product, they said that they can cancel it now but I can only book a new product switch after I've made the payment for one month (the next payment due on Oct 1) at the SMR of 3.74%.

That being the case, I'm struggling to work out if it is still worthwhile to do this or just leave it at 1.24%?

Please could someone help me with how to go about calculating which one leaves me better off -

1. Leaving it at 1.24%
2. Cancelling the product switch, paying 3.74% for one month and then 1.19%.

Thanks,

Kala

Brighty

How long on the mortgage?
Any product fees with either deal?

muhandis

31 years, both have a £899 product fee.

Brighty wrote: »

How long on the mortgage?
Any product fees with either deal?

Brighty

So would you need to pay the product fee twice if you cancel the 1.24%?

If not and assuming you're adding the fee to the mortage, just plug the numbers into a mortgage calculator for each of the three rates.
I got

1.24% monthly payment roughly £861, balance after 2 years roughly £251654

1.19%monthly payment roughly £855, balance after 2 years roughly £251543

So going for the 1.19% would save you roughly £144 in monthly payments and leave you with a balance £111 lower, so you'd be better off by £255. However, that one off 3.74% payment would be £1208, £347 higher than if you stayed with 1.24%, plus it would probably push your end of 2 year balance up a smidge too. Stay as you are

muhandis

Brilliant, thank you so much!

Brighty wrote: »

So would you need to pay the product fee twice if you cancel the 1.24%?

If not and assuming you're adding the fee to the mortage, just plug the numbers into a mortgage calculator for each of the three rates.
I got

1.24% monthly payment roughly £861, balance after 2 years roughly £251654

1.19%monthly payment roughly £855, balance after 2 years roughly £251543

So going for the 1.19% would save you roughly £144 in monthly payments and leave you with a balance £111 lower, so you'd be better off by £255. However, that one off 3.74% payment would be £1208, £347 higher than if you stayed with 1.24%, plus it would probably push your end of 2 year balance up a smidge too. Stay as you are

getmore4less

The max you can save is based on interest only

£265000 (0.0124-0.0119)*2 = £265

that won't cover the extra fee(£899) or the month on the higher rate(£560 extra interest)

switch paying the fee and the extra month will have you over £1k behind.

more accurate using the same payment on both say £860 and what's left in 2 years

£265000 @ 1.24% £860pm £250,764
1month
£265000 @ 3.74% £860pm £264,966
add the fee 23months
£265,865 @ 1.19% £860pm £251,998

the real payment won't make much difference