Remortgage decisions - give up flexible with low SVR for long-term fix?

KerryGold

Mortgage thoughts. Hi all, we have been in this house nearly 5 years now and our current fix is coming to an end. We currently have about 60% of our mortgage on an old flexible deal that has a SVR capped at 2% above base rate. The other 40% is on a fix and coming to an end (where it will go to more like 4% above base rate).
We have to decide whether to just do a new fix for the 40% and keep the flexible 60% or remortgage the whole lot onto a new fix. We could fix the lot for about the same price as we're currently paying now but then we lose the flexible options.
What do other people think? How high will interest rates go? Is security better than long-term flexibility?
P.S. I know no-one actually knows the answer (and we will be speaking to our IFA in the next few weeks), just interested in other prospective or opinions!
K x

tlc678910

Hi,

I'm guessing you might be with nationwide.

Based on nothing more than what I think I would do:

If the house was a stepping stone property and you hope to move on I would consider a 2 or 5 year tracker for the 40% (depending on my timescale for moving) and leave the 60% as it is. This is to avoid early repayment charges on moving.

Also someone might wonder why you don't move the 60% to the best deal also but if you do when the fix expires you will have lost the link to the no more than 2% above base rate promise and be in a higher standard variable rate for the whole amount if you are unable to remortgage at that time.

If I was confident that I wanted to stay in the house for the very long term I would consider a very long term fix. The 5 or preferably the 10 year fix for the entire amount. As you say it's pretty much the rate you are paying now and won't cost much more than the lower rate short term trackers for the peace of mind.

I don't expect rates will go up much, If at all in the short term. As for falling - you are tracking 2% above base so how much lower could the rate feasibly go - not much. What the long term fix does offer is certainty in a very uncertain world against rates going up further into the future.

It's probably not worth paying product fees unless you have a huge mortgage but use the mortgage rate finder on the nationwide site with your property value and loan amount and it will tell you the cost over the term so it's easy to see if it's worth paying the fee for the better rate of not.

Tlc

KerryGold

Thanks Tic. Very observant of you. You are exactly correct.

We are considering the 10 year fix but wondering if we will be annoyed if we give up the flexible options. Currently, we don't anticipate wanting to use them but of course one of us could fall I'll or lose our job or something.

We don't have any intention of moving. We are just completing a massive refurbishment of the house downstairs. New kitchen etc.

If we did move, we would likely port our mortgage again. However, I may have a large sum coming my way in the next few years. If we did a 10-year fix, would we be stung by early repayment fees if we wanted to pay it off? Would those fees outstrip the savings to be had in the meantime?

Thanks!

MortgageMamma

KerryGold wrote: »

Thanks Tic. Very observant of you. You are exactly correct.

We are considering the 10 year fix but wondering if we will be annoyed if we give up the flexible options. Currently, we don't anticipate wanting to use them but of course one of us could fall I'll or lose our job or something.

Take an income protection policy out to insure against loss of income.

We don't have any intention of moving. We are just completing a massive refurbishment of the house downstairs. New kitchen etc.

If we did move, we would likely port our mortgage again.


Porting can only be done if your circumstances and the property you wish to purchase match the lenders criteria. Its not a guaranteed option as the lenders criteria could change quite significantly over the long term

However, I may have a large sum coming my way in the next few years. If we did a 10-year fix, would we be stung by early repayment fees if we wanted to pay it off? Would those fees outstrip the savings to be had in the meantime?

There are mortgages available that allow 20% of the original loan balance to be paid off yearly without penalty so for example, if you borrowed 100k with a lender that did this you could pay of 20k per year without penalty. Most fixed rate mortgages only allow 10% per annum. This could be a good tactic to reduce loan balance with a lump sum. However if you wanted to repay the entire mortgage then there would be penalties with a fixed rate if you were still in the incentive period. Perhaps a 5 year fixed could be a better option for you?

Thanks!

As always, take advice with an experience whole of market mortgage adviser - its vital to ensure you select the right product to meet your needs and to avoid any potential penalties in the future

MM

KerryGold

Hi MM,

Thank you. We do already have critical illness cover and will be meeting with our IFA later this month.

My lump sums should enable us to pay off the mortgage so maybe a 5-year fix would be a better option.

From your opinion, you would give up the Nationwide BMR and fix the lot?

K x