Stay with offset or move to fixed rate repayment

cambs1999

Hi,

We currently have an offset on a 2y tracker of 1.99% which is due to end in next couple of months.

We owe £93,000 with around 19y to go. LTV 25%.
We are hoping to repay in around 10y.

The best offset rate is a 2y fixed 1.84% but £725 booking fee or a 2y 2.29% no booking fee.

We save around 48 per month by offsetting but some of these savings would need to be used within next 5 years or so.

However with it likely that rates will increase I'm thinking of fixing for 5 or 10 years but this means giving up my offset mortgage and moving to repayment and we now don't earn enough to be able to get it back.

The best 5 year is 1.94% or 1.79% with booking fee of £725 (so 1.94% looks better value for us taking into account around £12 per month for the booking fee).

Or a 10 year for 2.49%.

I've seen posts mention working out the interest rate needed at 5y years to compare value on the fixed rate but I'm not quite sure how to work this out as we have 19 years to go and don't want to reduce the term just to give us security in case of income change etc.

Can anyone help me work this out and give general advise as to whether to keep my offset or move onto repayment?

dimbo61

http://www.whatsthecost.com/mortgage.aspx

Putting £93,000 mortgage balance at 1.94% ( fix for 5 years) and 19 years comes up with £488 a month.

However I Love offset mortgages and having our savings offsetting the mortgage but also there if we need money ASAP
What kind of deals can you find for offset mortgages ?

Who are you with now ?
Do they have new deals for existing customers which are still offset ?

getmore4less

After 5 years paying £488pm

£93,725 @ 1.79% £71,887
£93,000 @ 1.94% £71,744

£143 better off no fee.

one option if you have an idea of cashflow is to use some of the saving to pay down the debt and then rebuild towards what you need.

With mortgage and savings rates being so close these days offsets are a lot harder to make work.

Glover1862

getmore4less wrote: »

With mortgage and savings rates being so close these days offsets are a lot harder to make work.

I couldnt find any decent saving rates for instant access (As you would with an offset) I need 1.84 or better, care to share any for £50k and over ??

getmore4less

Might have to spread it around a bit.

Once the higher savings rates absorb some of the money the rates needed for the rest get lower.
Depends on the difference in rates and offset funds to loan ratio.

edit: add the equation.


M : mortgage debt
S : standard rate
O : offset rate

C : savings capital
N : net savings rate

C/M == (O-S)/(O-N)