1.91% 2 year fixed Vs 2.19% 5 year fixed?

UKPCbstrds

Which one would work out best?

If I went for the 1.91% would obviously re-mortgage after 2 years, but would it be worthwile paying extra for two years and go for the 2.19% 5 year one? These 2 products have zero fees.

There is also a third option which is 1.65% for 3 years but this has a £899 fee. Should I also be considering this?

I have gone for the sum of £130,000 over 20 years.

sal_III

Without knowing the amount you are borrowing we can't tell you whether the 3 year fix with fee works out cheaper.

The difference of 0.28% between the 2 year and 5 year fix seems to low to me, are they from the same lender? If these are the only options I would go for the 5 year fix, but would suggest to you to shop around.

getmore4less

depends on information you have not given and how much rates go up during the 5 years

amount borrowed.
rates
payment
term
fees
LTV(to judge if the rates are any good)

UKPCbstrds

sal_III wrote: »

Without knowing the amount you are borrowing we can't tell you whether the 3 year fix with fee works out cheaper.

The difference of 0.28% between the 2 year and 5 year fix seems to low to me, are they from the same lender? If these are the only options I would go for the 5 year fix, but would suggest to you to shop around.

Hi it's 130000 borrowed over 20 years

PierremontQuaker03

Who is the provider?

UKPCbstrds

PierremontQuaker03 wrote: »

Who is the provider?

Barclays bank

getmore4less

£130k over 20years

option rate fees payment add fees
1 1.65% 899 £636.32 £640.72
2 1.91% 0 £652.12 £652.12
3 2.19% 0 £669.41 £669.41


if rates don't change and no new fees
Amount owing at Y2 Y3 Y5 with first fees added

1. £119,664.82 £113,907.26 £102,103.40
2. £119,117.20 £113,518.03 £101,993.96
3. £119,407.54 £113,934.93 £102,623.85

make the payment the same for same cash flow.
payment £670.00
1 £118,950.82 £112,827.34 £100,273.26
2 £118,680.17 £112,856.16 £100,869.31
3 £119,393.08 £113,913.00 £102,586.48

At Y3
The 3y fix is £1.100 ahead of the 5y fix
A second 2y at the same rate would be around the same as the 3y fix

At Y5
a series of 2y at the same rate could have you around £700 ahead
a second good deal on 3y could have you 2,300 ahead less the fees.

to break even with the 3y then a 2y no fee you need a rate of 2.705% about 0.8% more than the current 2y rate.

if you think rate will only go up 3 time 0.25 then a 3+2 could be a good call if you think they will go up more then the 5 year looks good.

For a 3y +3y with a new £899 fee to break even at Y5 you need a rate of 2.279% 0.629% more than the current 3y rate.

amanda5356

I would like to know on what grpounds mortgage companies charge such high fees to keep you on a fixed mortgage? They may call it an admin fee but my last paymet of over £1000 represents a lot of administration that I am sure would actually have amounted to no more than a couple of clicks on a keyboard. I really want to challenge this.

UKPCbstrds

getmore4less wrote: »

£130k over 20years

option rate fees payment add fees
1 1.65% 899 £636.32 £640.72
2 1.91% 0 £652.12 £652.12
3 2.19% 0 £669.41 £669.41


if rates don't change and no new fees
Amount owing at Y2 Y3 Y5 with first fees added

1. £119,664.82 £113,907.26 £102,103.40
2. £119,117.20 £113,518.03 £101,993.96
3. £119,407.54 £113,934.93 £102,623.85

make the payment the same for same cash flow.
payment £670.00
1 £118,950.82 £112,827.34 £100,273.26
2 £118,680.17 £112,856.16 £100,869.31
3 £119,393.08 £113,913.00 £102,586.48

At Y3
The 3y fix is £1.100 ahead of the 5y fix
A second 2y at the same rate would be around the same as the 3y fix

At Y5
a series of 2y at the same rate could have you around £700 ahead
a second good deal on 3y could have you 2,300 ahead less the fees.

to break even with the 3y then a 2y no fee you need a rate of 2.705% about 0.8% more than the current 2y rate.

if you think rate will only go up 3 time 0.25 then a 3+2 could be a good call if you think they will go up more then the 5 year looks good.

For a 3y +3y with a new £899 fee to break even at Y5 you need a rate of 2.279% 0.629% more than the current 3y rate.

Hi which tools did you use to do these calculations?

getmore4less

I used to use

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

then work through the numbers.

That got tedious for the regular questions/calcs so I now have a spreadsheet to do some of the work.

You only need a few of the built in formula to do a lot of the work.
there are only 4 variable to a mortgage and once you have 3 you can work out the 4th.

For most of the above it is just 2 formula.

PMT get the payment from rate,amount and full term
FV get the amount owing(future value) from a rate, Number of payments, payment, starting amount

For the follow on break even rates I still do it by hand.


Often people miss of information so I also have a page that from just rate and payment it can work out the range of terms and amounts that fit the data using a rounded+- £1 if the payments are full £.

tacpot12

I would like to know on what grounds mortgage companies charge such high fees to keep you on a fixed mortgage? They may call it an admin fee but my last payment of over £1000 represents a lot of administration that I am sure would actually have amounted to no more than a couple of clicks on a keyboard. I really want to challenge this.

As far as I know you can challenge this. Under the Consumer Rights Act, you can challenge unfair terms, including non-refundable payments that are in excess of a genuine estimate of what the company would lose directly because of the customer cancelling the contract.

I think that you would need to take the product out, then claim that the payment was unfair and you would get it refunded if the court agreed with you.

But you would need to be very clear on the basis for challenge. This will require a solicitor to decide the basis for the challenge. You could end up loosing in court, if the company can show that their costs to offer the fixed rate mortgage are reasonable. It may not be a simple administrative change, they may have had to pay certain fees to obtain the mortgage funding, and need to amortise these across all the customers who take a mortgage using that funding. One could argue that it should not be called an administration fee, but an "arrangement fee". I expect it called an arrangement fee, and that you will find that the company can justify it in court. You can ask them to justify it for free by making a complaint to the company. Your complaint might be that there is no transparency as to why the arrangement is so big.

I do think that the company MUST charge a lower fee to an existing customer vs. a new customer, because they don't need to do certain forms of administration for existing customers. If you can prove that the same arrangement fee is charged, I think you probably have an very strong case that the charge is unfair. Where there is a very strong case for the customer, the bank's legal team will advise the mortgage team to settle out of court.