Lock in mortgage offer?

rtho782

So, we're coming to the end of our first 2 year tracker mortgage. We bought our house for £230k in May 16, on a 95% mortgage, 17y term, 4.09% APR, £1488/month.

The house is now worth £245k according to our lender's index linked valuation. The mortgage is down to £202k, meaning ~82% LTV. We have three and a bit months to go, so are able to remortgage with our current provider.

We've just arranged a 1.89% APR no-fee 2y tracker to start from March 1st, this takes our monthly payment to £1273, saving us £210 a month and meaning we are paying £210 ish a month more capital off.

The original intent behind the tracker was to allow us to hit 80% LTV in about 6 months, then remortgage again with no early repayment charges onto a fixed rate deal, likely for 5 years.

Of course, as soon as we've arranged this I'm panicking about interest rate rises in the next couple of months.

If we get to March 2nd, and we are on the new mortgage, is it possible for me to apply for and be accepted for a new 5y fix, then just sit on the offer for a few months? I know when we first mortgaged the offer was valid for 6m, I feel like if we are able to do this I could then take the 5y fix offer if the rates went up!

Of course, the actual difference between the rates now and under 80% LTV are actually tiny, so I'm thinking we've been a bit silly trying to hit this psychological barrier.

amnblog

If you are ' panicking about interest rate rises' surely you should be on a fixed rate.

rtho782

Perhaps yes. The benefit of hindsight - before today I was confident rates would not go up until the end of the year!

I would think this would be another 0.25% rise to 0.75%. The difference between 85% LTV and 80% LTV rates is actually quite small - less than that.

So, having spoken to our lender about it just now, this is my plan:

1. Make 1st new payment on March 2nd.
2. March 3rd, arrange new 5y fix to start as far away as possible (likely June 1st).
3a. If, by about May 20th, Interest rates have gone up we go ahead with the planned switch on 1st June.
3b. If, by about May 20th, Interest rates have not gone up, we cancel the planned switch, and then on June 3rd arrange a new one to take effect from 1st Sept.

We can carry this process on indefinitely, and are only exposed to small periods of risk (e.g. paying 0.25% more for a couple of months, or rates rising between deal cancellations and new deals).

Our main risk now is rates changing this month, but I don't think this is likely.

The next MPC meeting is Feb 8th, so if we get past this we are safe until we can lock in a rate (after that it is Mar 22nd)

Thrugelmir

rtho782 wrote: »

Perhaps yes. The benefit of hindsight - before today I was confident rates would not go up until the end of the year!

Really? Analysts have potentially 2 or 3 rises pencilled in for this year by the BOE. Watch what the Fed is indicating they will do over on the otherside of the the pond. As this will ripple through the global markets.