5 year fixed implications

Jonah01

Hi guys,
Just coming off a 2 year fixed with Nationwide 1.59%. 
Looking switching products with them to either the 2 year fixed 1.09% or a 5 year fixed at 1.24%.
This isn't a "should I fix for 2 or 5" "what will the rates do" question it is more about the implications if we wanted to move if I go for the 5 year fix which I think I'd prefer.
We aren't planning on moving but you never know. The products I am on are portable and I have ported one of them before.
Am I missing something? Is porting a mortgage not always guaranteed?

Thanks

K_S

@jonah01 Porting is always subject to meeting the lender's criteria at that point in the future.

An example with Nationwide for a client was where I placed the case with Nationwide a few years ago based on their favourable criteria towards low-basic high-commission renumeration but when it came to porting it the income (which had actually increased) didn't stack up for Nationwide anymore due to how they look at commission post Covid. So they ended up paying an ERC to change lenders.

But otoh if your income is straightforward (employed, basic salary) and you don't expect to need to maximise borrowing for a home move, I suppose you could rely on being able to port if needed.

[Deleted User]

I think most brokers have got a similar situation at the moment to what KS describes.   Nationwide used to be great for variable income clients as they took 100% of all income but now they only take what is marked as Basic Pay.  I even have someone who has contractual out of hours pay for night shifts and they wont take it as it is not called Basic Pay.  

If i look at my cases since the start of the year, I have 4 different clients who couldn't port their current deal for different reasons.  Some where just that the lender cut affordability massively,  some were because the current lender weren't interested in self employed at moment, and some were just due to general criteria changes.  Roughly about £20k of ERC paid to get them moving. 

I also note that quite a few lenders have changed their mortgage offers when it talks about porting to say 'You do not have the right to port this mortgage'.   Its not saying you cant port it, just saying that it is not a contractual right. You have to apply and be accepted as a new client

Jonah01

Thanks for this information. My income is pretty standard without any oddities so may be ok.

Will have a think. 2 years just seem too short

Thrugelmir

Jonah01 said:

Will have a think. 2 years just seem too short

Rates are unlikely to drop significantly lower.  Are there any product fees to pay? 

Jonah01

That was with £999 product fee

Thrugelmir

Jonah01 said:

That was with £999 product fee

Two year fix may result in a further product fee to pay. Needs to be weighed into your thinking. 

Jonah01

by my calculations if i went 2 year +£1k then another 2 year +1k all at 1.09% (no guarantee the second 2 years would be that low)
versus 5 year +1k at 1.24% I'd be better off on the 2 year + 2 year route by £401.
£401 versus the risk of rates going up slightly. Would only have to go to 1.19% to eat up that saving.
LTV is 58% so in 2 years if house prices move that could push me into the not so cheap zone.
Again I'm not asking that question about rates going up or down as no one knows but if we aren't planning on moving the 5 year fixed seems like the most sensible route.

fewcloudy

Jonah01 said:

LTV is 58% so in 2 years if house prices move that could push me into the not so cheap zone.

@jonah01 I may be misunderstanding you but if in 2 years time house prices move UP, does that not mean your LTV would decrease further, so the opposite of "pushing you into the not so cheap zone"?

*And I stand to be corrected, but I would think once you have reached a LTV as low as 58%, the rates/offers are about as low as they are going to get...

Jonah01

sorry my point was if house prices decreased it may push my LTV to 60%+ where the deals wouldn't be as attractive.

getmore4less

breakeven over fixed term  mortgage size for the 2 option.
1.09% V 1.49%  2 years £999 fee

	rate difference, mortgage size needed
	0.40%
5	£154,965.82
10	£138,501.50
15	£133,764.13
20	£131,517.37
25	£130,207.48
30	£129,350.62
IO	£126,297.79

1.24% V 1.49% 5Y £999 fee

	rate difference, mortgage size needed
	0.25%
5	£158,678.84
10	£107,153.15
15	£96,662.00
20	£92,152.63
25	£89,647.75
30	£88,056.36
IO	£82,464.39

The actual  size is payment dependant

Mortgage needs to be over ~£150k to be looking at 2 x 2 years on the fee based
looking at £200k  over say ~20y   £1000pm payment. over 4 years
with the 5y fix

amount	rate	payment	owing
£200,999.00	1.24%	£1,000.00	£162,030.24

and 2 x 2y

amount	rate	payment	owing
£200,999.00	1.09%	£1,000.00	£181,174.48

amount	rate	payment	owing
£182,174.00	1.09%	£1,000.00	£161,934.78

~£100 saved   (£300k the saving goes up to ~£665)

over time sometime ahead sometimes behind,
bigger mortgage the savings creep up while rates stay low
Looks like you are somewhere in the £200k-£300k range

if you did move and port does it effect the rate for the ported part if the total borrowing goes over 60%?
if it stays at the low rate that might be a bonus as net level up on the 5y fix is 1.54%/1.79%

even when there are no plans to move it can happen but is that likley to be something disruptive that effects affordability anyway

their ERC are not as bad as some lenders now.

5 year fixed rate products

5 year Fixed rate ERC

Year 1	Year 2	Year 3	Year 4	Year 5
3%	3%	2.50%	1.75%	0.75%