Nationwide 10 year fix vs. Santander (mortgage renewal)

Half_Price_Sky

The time has come to renew my mortgage deal. I'm looking for a fixed rate without fees. My LTV is 69% and I'm currently paying £278. The standout deal from my current provider Santander is their 5 year fix at 2.39%.

I'm trying to decide whether to take that or move to Nationwide for their ten year fix at 2.79%? Is moving really worth the hassle? I'm very tempted by the fact interest rates are currently low but expected to go up soon. Could this be the time to lock in for the long term?

From Santander I'm offered:

2 year fix @ 2.19% = £231pm
5 year fix @ 2.39% = £237pm
7 year fix @ 2.99% = £256pm

Nationwide's 2 and 5 year fixes aren't really worth me bothering with as they're similar to Santander's. But their ten year deal is tempting me to move. They're also offering £500 cashback / free legal fees and free valuation.

Nationwide:

10 year fix at 2.79% = £252pm

If I take the free legal fees from Nationwide then as far I'm aware the only thing I'd have to stump up for is Santander's exit fee of £225.

Surely it's worth the extra £15pm for a ten year fix over a five year one?

If anyone has experience of moving provider before I'd especially like to hear how it went. If there were any hiccups etc or was it a smooth transition?

AnotherJoe

10 years is a long time. Whats the ERC?

Half_Price_Sky

AnotherJoe wrote: »

10 years is a long time. Whats the ERC?

Just been looking into that. It's 7% for years 1 to 4. Then 6% at year 5, followed by a 1 pc decrease each subsequent year until it reaches 1% at year 10.

Santander is 5% for the entire five year term.

I've been here five years now and most likely will be another five too. I guess you're right. Once you start talking decades I can't say exactly what I'll be doing around then. I might want to sell up at some point.

SG27

The nationwide 10 year deal will be portable though. So you wont pay any ercs if you move house. Just as long as you continue to meet their affordability criteria, whatever that may be at the time.

getmore4less

Are they are for the same borrowings and terms?

Sticking your numbers in my spreadsheet with a range of +- £1 to account for rounding

1. 2.19% = £231pm
2. 2.39% = £237pm
3. 2.99% = £256pm
4. 2.79% = £252pm

then for the Santander rates

£59500 over 39 years drops out as being close.

1. 2.19% = £231pm £232.13
2. 2.39% = £237pm £237.18
3. 2.99% = £256pm £255.88

but that leaves this one wrong

4. 2.79% = £252pm £249.56

What amount and full term are you borrowing.

with the real amount term can crunch some numbers to put the difference into real £

Half_Price_Sky

getmore4less wrote: »

Are they are for the same borrowings and terms?

Sticking your numbers in my spreadsheet with a range of +- £1 to account for rounding

1. 2.19% = £231pm
2. 2.39% = £237pm
3. 2.99% = £256pm
4. 2.79% = £252pm

then for the Santander rates

£59500 over 39 years drops out as being close.

1. 2.19% = £231pm £232.13
2. 2.39% = £237pm £237.18
3. 2.99% = £256pm £255.88

but that leaves this one wrong

4. 2.79% = £252pm £249.56

What amount and full term are you borrowing.

with the real amount term can crunch some numbers to put the difference into real £

***Edit the Santander ERC is 5% for the full term and not 6%***

The full amount is £58,905 (property value £85k) and the term remaining with Santander is 28y 6m.

I think I've just put in 28y only on the Nationwide calculator which woukd explain why that figure was a couple of quid out.

getmore4less

I should have said 29 years dropped out, not 39.

Working with 2, 5, 10 years.
£58,905 28y 6m

1. 2.19% £231.70
2. 2.39% £237.67
3. 2.79% £249.88
4. 2.99% £256.12 (not using this one)

amount owing in 2 5 10
1 £55,860.95 £51,037.68 £42,260.82
2 £55,949.45 £51,242.88 £42,609.22
3 £56,120.95 £51,642.84 £43,294.89

Note that even with a lower payment you owe less with the lower rates.
(some miss this and just look at the difference in payments)

Now make the payment £250 for all of them to level the cash flow.

1 £55,412.29 £49,878.12 £39,807.65
2 £55,646.65 £50,457.88 £40,939.67
3 £56,118.11 £51,635.41 £43,278.93

what that tells you is(assuming rates don't change for 10 years) is the cost difference between 5 x 2y over a 10y is ~£3,500.
(just the difference in payments was ~£2,200)

with the 5y fix at Y5 you will owe ~£1,200 more on the 10y fix
(difference in payments was ~£730)

if we add a moderate rise of 0.25% at Y2 and another 0.25% at Y5

1 £55,412.29 £50,288.43 £41,483.19
2 £55,646.65 £50,457.88 £42,174.96
3 £56,118.11 £51,635.41 £43,278.93

The gap has narrowed ~£1,800 for 5 *2y V 10y

add 0.5% at Y2 and 0.5% at Y5

1 £55,412.29 £50,701.83 £43,217.69
2 £55,646.65 £50,457.88 £43,442.62
3 £56,118.11 £51,635.41 £43,278.93

Now around even

The break even rate rise at Y5 for 2 x 5y over 10y is 0.936%

This quantifies the thought process doing a 5y against 10y

rather than

Rates are going up I should take the longer fix

you can improve it to

Rates are going up 1% or more in 5 years I should take the longer fix

Then there are all the other things to consider moving, income, overpayments, additional borrowing etc.


(these were done with a new page on my spreadsheet so hope they are right.)