Fixed rate coming to an end. 76% LTV

ernest1983

Hello all,

I'm hoping to get some thoughts and the general feeling of the way house prices and mortgage rates might go in the next 3 months or so.  I know no one has a crystal ball, but any input would be very welcome.  As the house price sub-forum is currently closed I thought people here might have some opinions on prices.

Our fixed rate is coming to an end on 31st January 2021.  We are currently with Halifax, with a balance of £410k an LTV of 76%.  We are not going to remortgage as we are both on reduced pay because of COVID - we couldn't pass an affordability check at the moment, so we only looking at product transfers.
We are currently in the 75-80% band with Halifax and they have some reasonable deals, but we are just 1% away from the next band, where there are obviously some better rates.  We don't have the cash to make an over-payment of 1%.

Halifax will allow us to do a product transfer, free of any ERC, from 1st November.   I suppose that would be the safest thing to do in case rates increase or if the house prices start going the other way.  But if we were to wait a couple more months, keeping a close eye on the monthly Halifax HPI, maybe the recent increases will continue and we will get pushed in to the 75% band, where there is a deal that we really like.  I know that the indexed house value is updated every 3 months, and it was just updated a few days ago.  But will the rates have gone up in the next 3 months - no one knows.

The alternative would be to pay for a new valuation and hope for the extra £6k in house value, but I'm not so confident with that and it might actually go the other way.

Any thoughts pls.
TIA!

bamgbost

How much of a different is the rates at 70-75|%?

And how much longer do you need to keep making monthly payments to fall into that bracket?If its much more than 3/4 months. It may not be worth the risk, as the rates may all creep up.

I think they have gone up recently (slightly)

We were in a similar predicament 6 months back. although at 76.6% LTV. And therefore just bit the bullet and did the product transfer. With Halifax too!

ernest1983

Thanks for replying.
The difference in rates is about 0.4%.  For example for a 3 year fix:
75-80% LTV is 1.90%
70-75% LTV is 1.49%
Just by making the usual repayments, by the end of January we would be about £3,500 off the 75% LTV, if the house value stays the same.  We might be able to manage an overpayment of £3,500 in January, but it might be for nothing if rates creep up.  As you say they have slightly gone up lately.
However our "indexed" house value has increased by £15k in the last 3 months, so that in itself (if repeated) would easily do the job on it's own.  
I might just do like you, and go for it sooner rather than later.  

getmore4less

What about a purchase 0% CC to push all normal spend on that and create a cash pot that could swing it at the time.

As those have a £1,500 fee if thatwould tip you into the 75% there is a no fee 3y rate of 1.63% which is cheaper than the fee 75+ rate.of 1.9%

ernest1983

Like the idea of diverting spend to a 0% CC.  I'll look into what I'm eligible for, thanks.
Yes if I do end up waiting it out until Jan, the fee might end up being an issue so that 1.63% rate is a good option.  

grumiofoundation

ernest1983 said:

Thanks for replying.
The difference in rates is about 0.4%.  For example for a 3 year fix:
75-80% LTV is 1.90%
70-75% LTV is 1.49%
Just by making the usual repayments, by the end of January we would be about £3,500 off the 75% LTV, if the house value stays the same.  We might be able to manage an overpayment of £3,500 in January, but it might be for nothing if rates creep up.  As you say they have slightly gone up lately.
However our "indexed" house value has increased by £15k in the last 3 months, so that in itself (if repeated) would easily do the job on it's own.  
I might just do like you, and go for it sooner rather than later.  

Interest rates may change but you can probably assuming the difference in rates will stay roughly same.

Based on those numbers (assuming the difference stays the same) 0.4% difference on 400k is £1600 extra in interest each year. 

Thats £4800 over 3 years, so if you can find a way to overpay the £3500 you will end with an extra £1300 up after the 3 years. 

Thrugelmir

What rates are on offer to you for 2 and 5 year fixes? 

Any product fees? 

ernest1983

2 year:
75-80% LTV is 1.83%
70-75% LTV is 1.42%

5 year:
75-80% LTV is 2.21%
70-75% LTV is 1.73%

All of them have £1499 product fee over the fixed term all of them seem to work out slightly cheaper than the alternatives with no fee.

getmore4less

On £410k the difference is quite small in favour of pay the fee except when paying down the mortgage by the fee swaps band. 

ernest1983

Absolutely.  When the time comes it will depend on what the house value is.  If we end up needing to make an over-payment to get into 75%, then we will go for the product with no fee.  If the house price works in our favour then we could take the lower rate product with a fee.
I suppose it's best to just monitor things from November and be ready to make the switch if things start to go in the wrong direction.