Fixed rate term just finished...what now?

miracleboy

Hi all,

The 2 year fixed rate term on our 2nd house just finished with Abbey and we got a letter saying the rate is going to jump next month but just under £300.

Obviously I will now be looking for a better rate, but other than that don;t really know the procedure.

Any tips or pointers where to go next - I think we'd prefer another fixed rate term, as stability is more important than saving a few bucks.

Cheers guys!
Matt

:money:

KTF

You should really sort this out 6 weeks before the end date as the remortgage can take that long so dont hang about.

Your first port of call should be a fees free whole of market advisor who will be able to search for the best deal for your circumstances.

MortgageMamma

you may not get a better rate as mortgage rates have gone up since you took your last mortgage, but if you see a fee's free mortgage broker they will get you the best one available to suit your needs. ensure they have full market access.

MM

herbiesjp

Firstly see what Abbey will offer you, and then compare against the best of the rest

miracleboy

Okay I did some comparisons...

I need to borrow 132000, want a fixed repayment over 3 or 5 years.

Brittannia seem to be coming out on top for both;

3yr Fixed, 5.69%, £801.95p/m, £1409 costs
5yr Fixed, 5.39%, £825.64p/m, £809 costs

Trying to get a quote from Abbey.

Why are the costs so high, and is it usual to just add these onto the loan?

ducey

The costs are normal, and in most cases be added to your mortgage. I've just remortgaged and took out £144000 with the west bromwich (http://www.westbrom.co.uk) on their 5.99% 5 year fixed with no fees. This was the best one I could find and even L&C that Moneysavingexpert recommend couldn't beat that rate or fees.

dunstonh

Why are the costs so high, and is it usual to just add these onto the loan?

Because it costs a lot of money to arrange these rates and there is little or no profit on the interest. They have to secure the borrowing themselves to be able to offer those terms and that carries risks as well. Just look at Northern Rock. Also, redemption charges are now lower or totally removed. So, instead of paying a bit at the start and a bit at the end you pay the bulk or all of it at the start.

Adding them to the loan is the expensive way of doing it as you will pay interest on them. You need to factor in the costs in your calculations as a higher interest rate with lower arrangement fee could be cheaper over the tie in period than a lower interest rate with higher arrangement fee.

To be cost effective, you really need to be looking at 5 year fixed.

ponsmort

The lenders now seem to think that they can get away with charging high application fees! However, sometimes it is worth paying the higher fee to secure the cheaper rate.

I have spotted a better 3 year fixed rate than Brittania and the fee is £995. I would suggest that you need to have a chat with someone to work out the actual cost over the term to see whether is it worth paying a fee or shopping around for a more expensive deal with a smaller fee - remember - if you add the fee to the mortgage you will pay interest on it over the remaining term of your mortgage!

KTF

I have created a spreadsheet that allows you to compare the different costs for each deal. If anyone would like a copy then let me know.