Should we give up lifetime tracker?

flambardsdivided

Partner and I are in the process of buying a new house. Moving closer to parents as Dad is very ill and Mum not coping as his carer. We are having to borrow more to do so, as we are moving from a cheap area into a much more expensive one.

We are long time Barclays customers, over twenty years. We currently have c. £53k left to pay on our mortgage (split into two parts) and 9 years left to pay it. We were very fortunate to get a great lifetime tracker deal when we first took out the mortgage: On £16k we pay 0.85% above base rate (so 1.35%) and on £37k we pay .19 above base rate (so 0.69%).

At our Agreement in Principle meeting with Barclays in November it was agreed we could port this current mortgage and, crucially, extend the term of it to 18yrs if we needed to. We subsequently decided we did need to extend it, in order to be able to have affordable monthly payments. The house we bought is at the top of our budget.

For the extra borrowing (which is £163k, taking our total loan to £216k) we have discussed the new rates Barclays would offer us. We are going with a 3-year fixed rate of 1.64% (more expensive than the rates Barclays first showed us in November, which is also not hepling).

On the basis of these discussions and working out our monthly payment scenarios, we find a house and have an offer accepted. I meet with Barclays yesterday to get the mortgage approved and signed off and the advisor starts off the meeting by telling me that as of January - as in 4 weeks ago - Barclays have changed their policy and they will no longer allow us to extend the term of the £53k part of the mortgage to 18 years. If we want to keep the lifetime tracker rate, we have to keep the term of that part of the mortgage to 9 years. This 'mixed term' scenario makes the monthly payments too expensive. So, the only option is to give up the tracker rate completely and put the whole £216k loan onto the fixed rate. Meaning that although our monthly payments will be affordable, we will be paying much more for our mortgage overall (my maths isn't good enough to do work out how much more). I asked the mortgage advisor if there was anything at all we could do, or anyone we could speak to, but was just completely shut down. If we want to keep the lifetime tracker rate, we can't extend the term and we've missed the boat by four weeks.

There are numerous articles in the press about banks doing what they can to get customers off of these cheap lifetime trackers. I am supposed to post back the signed mortgage papers today and am sat here hesitating and loathe to do so. I just want to ask if anyone has any advice about either taking it up with Barclays or whether we should just suck it up and accept that we've had a good deal and now we've got to face the reality of our situation and give up our tracker, especially given as the really good rate only applies to about to £37k (1/7 of what will be our new overall loan) and that that base rates are likely to rise so it will not be quite as good a good a deal when that happens and we may be better off on a fixed anyway. We're not clever enough to work out all the maths!

Thanks for any advice.

ACG

The overall rate you have will probably undercut a lot of what you can get elsewhere. However, there is talk of a rate rise in May, meaning your payments will likely increase in around 4 months.

If you are going to be struggling, it might be worth putting the whole mortgage on a fixed rate over a longer term, whether that be with Barclays or someone else.

flambardsdivided

Thank you for your response.

Thrugelmir

flambardsdivided wrote: »

There are numerous articles in the press about banks doing what they can to get customers off of these cheap lifetime trackers.

Barclays aren't forcing you off your life time tracker. Your financial circumstances are. In that you are looking to leverage yourselves up. Barclays are honouring your existing contract. Even if it's currently losing them money.

Personally I would try and hang onto these 2 rates. As normality returns in the years to come. Margins over base will progressively widen a little.

A fixed rate of 1.64% shelters you in the short term. In 3 years time the mortgage market may possibly be very different. You'll then have a sizable debt to refinance. Over what term are you proposing to borrow this money. Is there any possibility of extending it a little. To reduce the cash outgoing impact.

amnblog

When did you submit your full application, what were the requested lending terms then, and did you receive a full offer based on those terms?

It is a scenario where you had initial discussions in November but only started the application this week?

If this short Mortgage term is an issue for affordability you may be able to get a good deal with an alternate lender, particularly since you are only giving up the favourable rate on a quarter of your lending.

If you have not already formally applied you should put this problem on the toe of a Broker.

flambardsdivided

Thank you very much for responses.

The discussion in November was for a mortgage agreement in principle. We are now agreeing the precise terms having had an offer accepted on a house. And unfortunately the goal posts regarding the ability to extend the term of the £53k original bit of the mortgage have changed.

We are not able to further extend the term of the new loan beyond 18 years because of our ages.

Thanks again for replies, much appreciated.

amnblog

Bear with me on this but is the property price over £516,000

flambardsdivided

No, the property price is just under £400k.

amnblog

If it helps to settle your mind, the maths are like this...

1.35% interest on £16,000 = £216 pa
0.69% interest on £37,000 = £255 pa

Total = £471 pa

Interest on £53,000 at 1.64% = £869 pa

Difference is £398 or £33 per month

A 0.25% rate rise is worth £11 a month, so three rises and you are paying the same as the fixed rate anyway.

(The figures above do not allow for the narrowing of the interest rate gap cost as the £53,000 is repaid, but you get the point)

By the way, if you are Premier Banking Customers they should have a 1.59% exclusive three year fix available to you.

flambardsdivided

Thanks so much amnblog, that is very helpful I really appreciate you taking the time to look at this.

It does indeed get more complicated and brain frying trying to work out what we might lose over the course of the lifetime of the mortgage.

flambardsdivided

Does that mean amnblog that by putting the £53k bit of our mortgage onto the fixed rate for 18 years, as opposed to being able to extend and use our tracker rate, we will be paying an extra £7,128 (i.e. the £33 difference x 12mths x 18yrs)?