2.99% fixed for 2 years? Who can tell me where the catch is!?

gdhgdh

I was looking at my Cahoot account today and wondered what mortgage deals they have...

They just offer a click-through to CharcolOnline, where I found this:

http://mortgages.charcolonline.co.uk/Mortgages/BestBuys/productinfo.aspx?LenderProductCode=7328&type=0

I currently have a 3.49% 2-year fixed ending in a few months and the concept of moving to a 2.99% fix for 2-years seems wayyyyy too good to be true. I must be missing something - can someone point out where the catch is?

Cheers,
Gavin.

herbiesjp

The catch is you are at 2.99% for 3 months and then tied on on a variable rate of 5.07% for 5 years.

Not a good deal IMHO

gdhgdh

Yeh, but can't you simply jump ship after the 2-year cheap period has ended?

mrcow

The early repayment charges are listed further down the page.

Early Repayment Charges
Early repayment charges - 7% of the sum repaid until 30/09/06, 6% of the sum repaid until 30/09/07, then 5% of the sum repaid until 30/09/10, interest to the end of the month thereafter.

It's stating that if you repay before 2010, then the ERC is over £5.5k (or am I reading this wrong, as that seems very steep?)

gdhgdh

Ah there we go that explains it, then Too good to be true? Yup!

herbiesjp

There is no two year cheap rate - it is 3 months!

meanmachine_2

gdhgdh wrote:

I was looking at my Cahoot account today and wondered what mortgage deals they have...

They just offer a click-through to CharcolOnline, where I found this:

http://mortgages.charcolonline.co.uk/Mortgages/BestBuys/productinfo.aspx?LenderProductCode=7328&type=0

I currently have a 3.49% 2-year fixed ending in a few months and the concept of moving to a 2.99% fix for 2-years seems wayyyyy too good to be true. I must be missing something - can someone point out where the catch is?

Cheers,
Gavin.

Fact is you won't get a fixed rate deal as cheap as the one you originally fixed. I think the lowest at the moment are 4.8-ish.

You could wait six months, as the talk is of lower int rates as we slide into recession. But I doubt we'll see such low rates again for a long time.

The charcol mortgage you're quoting has a repayment penalty "hangover", which punishes you if you dare to cancel before a certain period is up. Most of these "too-good-to-be-true" deals have them.

YorkshireBoy

A cursory glance at https://www.moneyfacts.co.uk "best-buy fixed rate" 2 year mortgages (no extended tie-in) shows Newcastle and Portman at 4.38% and 4.39% respectively. Both appear to have high fees, with the Portman highest at £499.

Don't forget to factor in deeds release, surveyors fees, legal fees and other additional costs.

Two points for you to consider...

1/ In these times of low interest rates (and especially if your mortgage is not particularly large), the "fixed" costs (ie those above) of moving the mortgage to a new lender often cannot be recovered in short-term deals. Then again, who wants a long-term deal, and especially one with an extended tie-in, in these current times? Ask your existing lender what deals they have available to existing borrowers - it may work out cheaper than moving over 2 years.

2/ In reading various forums and the financial press lately, I've formed the opinion that interest rates are on the way down. Certainly not as far as the lowly 3.5% we've enjoyed 18 months or so ago, but I believe we'll see at least one 0.25% cut this year - who knows next year?

My own personal preference are BOE trackers, which I've had with https://www.ybs.co.uk since mid 2001. I change deals every 1-2 years, and I'm currently 8 months into a 2 year = BOE paying 4.75%.

knuckledragger

How about the First Active 4.75% tracker until 2010. Rate guaranteed to change in line with BOE rate within 5 days of the change (either up or down). Only drawback is that no matter what, their rate will not drop below 4.00%.
So, the chances of base rates coming down by more than 0.75% over the next 5 years anybody?

EdInvestor

Hi MM

meanmachine wrote:

You could wait six months, as the talk is of lower int rates as we slide into recession.

I think the idea of the lower interest rates is to prevent a slide into recesssion, not accompany it

meanmachine_2

YorkshireBoy wrote:

2/ In reading various forums and the financial press lately, I've formed the opinion that interest rates are on the way down. Certainly not as far as the lowly 3.5% we've enjoyed 18 months or so ago, but I believe we'll see at least one 0.25% cut this year - who knows next year?

You could well be right.

But with oil potentially rising to $80, yes $80 a barrel over the summer, and US rates on the rise, I'm no longer so sure.

Also beware of hidden penalty costs when leaving mortgage deals. Alliance and Leicester are notorious for these.