Mortgage retention rates: Lock in now or wait?

HampshireH

Have now received our mortgage options from Virgin.

Our product expires in June.

Our 2 options on £188,903.56 (current balance), 23 year remaining term are;

3 year fix
1.75% interest rate with a £995 fee
2.05% interest rate with no product fee

Or

5 year fix
1.69 interest rate with a £995 fee
1.98 interest rate with no fee.

We intend to fix for 5. Our current rate is 1.81 and we pay £832 a month. 

Based on the above our repayments won't go down dramatically but we will of course pay off a bit more by June.

Question is do we lock in the above rate now (Virgin confirm this until 21/02) or wait and see what the BoE do with interest rates and whether the banks drop their slightly.

Is it worth waiting a few months or  best to sign up now? (It seems far too early)

I completely understand we cannot predict the banks behaviours but based on current circumstances im hoping that if they don't go down then they won't go up either and remain static.

ACG

I read something the other day about virgin not chasing the rates. I am with Virgin money for my mortgage, I am "stuck" with them at the minute due to childcare costs, I am paying about 0.3% more with them than I could have got elsewhere. 
Realistically the difference in rates is unlikely to be significant one way or the other, if rates are important to you, have you thought about looking a tthe rest of the market? rates have been on a downward trend over the last week or 2.

HampshireH

ACG said:

I read something the other day about virgin not chasing the rates. I am with Virgin money for my mortgage, I am "stuck" with them at the minute due to childcare costs, I am paying about 0.3% more with them than I could have got elsewhere. 
Realistically the difference in rates is unlikely to be significant one way or the other, if rates are important to you, have you thought about looking a tthe rest of the market? rates have been on a downward trend over the last week or 2.

We aren't in a position to remortgage elsewhere as if we could we would get a better rate.

We have done a fair bit to the property and whilst we will have cleared the cc by June we still have a kitchen on finance and the high credit balance in our recent history due to home improvements.

If we had been debt free for the last 6 month's we would definitely be going elsewhere. It's just not worth the risk of having the house valued (potentially lower although it shouldn't be) or them turning us down on recent credit history. 

csgohan4

guess you don't have any other option than to use the retention products, however if you are close to the 60% LTV will dictate on whether to fix at 3 years or 5 years as that is when rates really will go down for you

Moneyminded

Have they given you any options for a 2 year deal? This will allow you to pay down your other debt and then shop around for a more competitive rate when the deal ends. Do you really want to lock yourselves into rates that are not competitive for 5 years? Your LTV ratio over this time could also make a big difference. Are you near a new LTV threshold? When could you realistically reach the next one?

HampshireH

Thanks for the replies
2 year fixed option is 2.05% with no fee or 1.70% with 995 product fee.

I've just checked after this month's payment and balance is £188,355.10.
We borrowed 200k and paid 258k for the property.

I'm not near 60% LTV but believe I've get it down to £185,000 by a June.

We will only have 5k kitchen finance debt come June. It's the history over the year which worries me for going elsewhere. We have borrowed about 10k in last 18months (and paid it all back on time) Having to go through credit checks etc only either to not be offered or get offered a worse rate.

We can't over pay as our savings have been put aside to fund mortgage payments for the next year, due to a baby due later this year and reduced income.

All budgeted for

Savings between now and then will go towards that pot and baby bits (and apparently fencing repairs after the current breeze)

Thrugelmir

HampshireH said:

We can't over pay as our savings have been put aside to fund mortgage payments for the next year, due to a baby due later this year and reduced income.

In which case opting the 5 year rate now would at least give you peace of mind and enable you to budget ahead. Even if the BOE were to reduce base rate. The impact on lending rates will be small. Lenders still need to make a margin on monies advanced. 

HampshireH

Thrugelmir said:

HampshireH said:

We can't over pay as our savings have been put aside to fund mortgage payments for the next year, due to a baby due later this year and reduced income.

In which case opting the 5 year rate now would at least give you peace of mind and enable you to budget ahead. Even if the BOE were to reduce base rate. The impact on lending rates will be small. Lenders still need to make a margin on monies advanced. 

Agreed Thank you. I knew this. Think I needed the push to do it so early

Whats_your_forte

You can secure this rate now and then closer to the actually changeover, if the rate has improved or indeed the end date has increased, you can cancel the request and jump on to the new rate

HampshireH

Whats_your_forte said:

You can secure this rate now and then closer to the actually changeover, if the rate has improved or indeed the end date has increased, you can cancel the request and jump on to the new rate

Really? I didn't know I could do this.

Whats_your_forte

Yep. Just done one last week and just check with VM the date you cancel the current offering before choosing another