Question on discount variable mortgage

GoonerByron

Hi,

My remortgage is coming up, I have always been on 2 year fixes before this. Obviously at the moment, fixed rates are terrible compared to the last few years and the best interest rate I can get is 3.1%.

I have never looked at variable mortgages previously but one is available at a 2 year discounted rate of 1.44%. I know this is a risk with rates rising, but put simply would the base rate need to rise by around another 1.7% during the 2 years before the lender puts it up to a point where it is a worse deal than the best fix I can currently get?

Thanks!

london21

If you want certainty better to fix.

Discounted Variable Rate Mortgages | MoneySuperMarket 

GoonerByron

london21 said:

If you want certainty better to fix.

Discounted Variable Rate Mortgages | MoneySuperMarket 

Sorry I understand that, but my question is are the variable lender only likely to increase the 1.44% Discounted rate as and when the BoE base rate changes? 

So if I was to take the risk, would I be expecting to better the Fixed rate of 3.1% as long as the BoE rate does not rise by another 1.7%?

Hope that makes sense!

D123456789

Who is the discounted rate with ? What is their SVR?

For example if their SVR is 4.5 % and your discount is 1.44 % then you will be paying 3.06%

or you say you have the option to fix at 3.1 % 

GoonerByron

D123456789 said:

Who is the discounted rate with ? What is their SVR?

For example if their SVR is 4.5 % and your discount is 1.44 % then you will be paying 3.06%

or you say you have the option to fix at 3.1 % 

No, the starting discounted rate that I will pay is 1.44%. It is an initial 2 year discount of 4.45% off their SVR which I guess is 5.89%. It is with Furness Building Society.

I’d like to know if that 1.44% will, most likely, only rise and fall with the BoE rate changes. i.e, would the BoE rate have to rise a further 1.7% for the 1.44% discounted rate to be around 3.1% (like the fix)

GoonerByron

Can anyone answer this? Close to applying for the variable and taking the risk for 2 years..

D123456789

This is the SVR changes for Furness over past few years if that helps you to decide. 

GoonerByron

D123456789 said:

This is the SVR changes for Furness over past few years if that helps you to decide. 

That’s really helpful, thank you!

Thinking the 1.44% variable may be worth the risk for a couple of years vs the 3+% fixed!

K_S

@goonerbyron Unless you submitted the application earlier today, the 1.44% product has now been pulled afaik.

If you want the surety of the rate tracking the BOE rate, perhaps worth considering a tracker rate. A discount rate depends on the lender's SVR which they can change at their discretion.

GoonerByron

K_S said:

@goonerbyron Unless you submitted the application earlier today, the 1.44% product has now been pulled afaik.

If you want the surety of the rate tracking the BOE rate, perhaps worth considering a tracker rate. A discount rate depends on the lender's SVR which they can change at their discretion.

Luckily, I phoned Furness yesterday. They told me the rate was going up from 1.44% to 1.99% overnight and that they had a backlog to apply going into August so I arranged an appointment for then and asked for email confirmation that they would honour the same discount as the 1.44% offer I would have got on the day (and attached a screenshot), which they gave confirmation to via reply. Just hoping they stick to that now once my appointment comes around! 

MWT

GoonerByron said:

Thinking the 1.44% variable may be worth the risk for a couple of years vs the 3+% fixed!

Just make sure that when it comes to the end of the discounted rate that you are in a solid financial position to apply to remortgage elsewhere.

This sort of deal is OK as long as you can avoid it becoming a trap...