What would you do

fatbelly

This is not advice - just what I'd personally do.

Fix at the lowest % I could - even if that means a 10-year fix. 

Expect inflation to make that monthly payment a smaller part of my income, very obviously, very quickly

tony863

Thanks everyone for your opinions so far. It's interesting to hear what people would do and I've captured a couple of things to think about.

Firstly, most are picking the 5yr or 10yr fixed as they seem sensible compared to historic rates. I've never been lucky with rates, buying out first house just before the market crash in 2007 and using northern rock to secure a 120% mortgage and a high rate compared to other lenders. We chose good locations so we've steadily built up good equity, but moved house during covid to benefit from the stamp duty rules. Now it feels that was where we made the mistake and now we face substantial increases for years to come.

Extending is only an option if we want to work towards 80 and that's just not an option. My aunt just turned 70, got diagnosed with cancer and died 7 weeks later. The point is that all of these plans are based on us being fit and healthy enough to work, but most will develop some kind of illness or ailment in their latter years. How many 65 year olds do you know that are still grafting hard to pay their mortgage? There's a good reason it's not many. Similarly, who wants to burden their widow with a mortgage to pay when the other half passes and there are still 10+ years to pay. My point is that extending carries huge risks simply by assuming health, when in fact the odds are against you. 

One interesting point made was to extend to the latest point and then look to overpay when rates came down. That's not something I'd considered, but I can't picture whether it would end up costing a fortune to do it or not. Am I right in saying the gamble would pay off if interest rates go low and I do maximum overpay, versus losing out if interest rates are high and trying to do the same? It feels like that would be great if we could have a repeat of the last 7yrs or so, but historic rates suggest it would be a bad idea.

In the grand scheme of things I think it'll be 5yrs before we see them coming back to below 3%. My guess is it'll peak at 6.50% with continued 0.25% increases over the next year before it gets to that level. I then think it'll take a long time to come down. 0.25% every 2 months from the time it tops out would mean 1.5% per year. So if my random guess is close, it peaks in summer 2024, then takes 2yrs to bring it down 3% to 3.5% in 2026. Id it plausible to suggest it might take another 2yrs to drop below 3%? Who knows, but at 3.5% my mortgage is still £200pm more using today's calculations.

All things considered, the 5yr or 10yr feel the safer options and the 10yr is tempting to give some longer term peace of mind. My head is still frazzled though! 

simon_or

Extending is an option with some banks if your stated retirement age is 80. If you choose to do that, no one is forcing you to work till 80 or keep your mortgage till 80.

Every bank will allow at least 10% penalty free overpayment a year so you could pay it off in 10-15 years if you wanted to.

The point of extending the term is to reduce the mandatory minimum payment so you get more flexibility around your finances but you can still make voluntary overpayments to effectively reduce your term.

Overpaying has the same effect as reducing your term, with the benefit that you can stop the overpayments of you hit hard times.

simon_or

Maka344 said:

simon_or said:

tony863 said:

I recognise no one has a crystal ball, but just looking for opinions outside of my own research. £226k mortgage to renew end Dec, meaning I can lock something in this week. Currently paying £1270 and will have 17yrs left.

Research suggests the higher rates are likely to stay, so I'm reluctant to opt for a tracker, which leaves me with fixed rate. I've watched rates across lenders and they've increased by 0.25 to 0.5% this week alone! Current offers suggest:

2yr and 3yr fixed approx 5.5% (+£450)
5yr fixed approx 5.05% (+£393)
10yr fixed approx 4.60% (+£330)

I'm having to sell my car, quit my savings contributions and reduce my streaming/TV subscriptions to afford the increase. No wage rises on the horizon and I'm not able to extend the period of the mortgage. 

I've come to terms with the situation, but I'm concerned rates will still be high, possibly higher in 2yrs time. Some articles I've read quote the average interest rate being 7.10% and suggesting long term rates (ie over the next 5yrs) will be at 4% with 6.50% peaks over the next 12-18m which may stay around for a long period after. 

Initial thoughts were to fix for 2yrs and hope they reduced, but the 5yr feels safer and the 10yr doesn't look too bad in the grand scheme of things. I don't like the thought of any of them, but my brain is frazzled trying to come to some kind of best guess scenario. 

It depends on the individual tbh.

I would look at remortgaging to a bank that allows me to extend the term to 80 (to minimise the jump in monthly payments while still leaving me the option to overpay) and take the 2 or 5 year fix. 10 years is just too long for me individually and you would have to depend on being able to port for the amount that you need based on the banks affordability and policies at some time in the future.

For next time, put a reminder for 8-9 months before the end of your fix. With a fixed rate ending on 31st December, you could have booked a Nationwide rate with a decision in principle back in May when rates were much lower and then reassess your options in July.

Out of interest, which banks allow you to extend until you're 80? Thanks

My broker's put me with Barclays in the past and Accord recently, both to 80. I don't remember exactly but she did say that there are a handful of banks that offer terms to 80 so I am sure there are others.

tony863

Quick update, I'm eligible to secure another deal today and below are what's being offered by Natwest 

6.24% 2yr fix £1768 no fee (+£498)

5.94% 2yr fix £1730 £1k fee (+£460 and £1k fee split over 24m is equal to +£41)

5.69% 5yr fix £1700 no fee (+£430)

5.54% 5yr fix £1681 £1k fee (+£411 and £1k fee split over 60m is equal to +£16)

As you can see, the rates available are quite a bit more than the mse portal. 2 questions,

1. Does anyone know if the portal is likely offering rates that have already expired? In other words, am I being offered overinflated rates.

2. Can I secure another mortgage 6 months early with another lender or can I only secure a product switch with my current lender? 

jj_43

Their is also the SVT option (probably much higher) but you can leave it anytime, no rush, cut your spending. Keeping options open is worth ££. Rates look peakly atm.

tony863

jj_43 said:

Their is also the SVT option (probably much higher) but you can leave it anytime, no rush, cut your spending. Keeping options open is worth ££. Rates look peakly atm.

Do you mean SVR? It's 7.83% and kicks in 1st Jan.

I'm keen on getting the questions answered as I'd like to know if I can secure a switch to say a 5.10% 10yr fixed with another lender NOW, but even if I can, are the rates shown on the mse portal likely to be out of date.

Both are key to the question of whether what I'm being offered by Natwest is indeed overinflated, or its more a case that they keep rising and the portal can't keep up.

Rates might look like they're peaking, but the base rate is predicted to hit 6.25 or 6.50% so lenders could be offering 7.3% or thereabouts as normal rates. 

MFWannabe

tony863 said:

jj_43 said:

Their is also the SVT option (probably much higher) but you can leave it anytime, no rush, cut your spending. Keeping options open is worth ££. Rates look peakly atm.

Do you mean SVR? It's 7.83% and kicks in 1st Jan.

I'm keen on getting the questions answered as I'd like to know if I can secure a switch to say a 5.10% 10yr fixed with another lender NOW, but even if I can, are the rates shown on the mse portal likely to be out of date.

Both are key to the question of whether what I'm being offered by Natwest is indeed overinflated, or its more a case that they keep rising and the portal can't keep up.

Rates might look like they're peaking, but the base rate is predicted to hit 6.25 or 6.50% so lenders could be offering 7.3% or thereabouts as normal rates. 

Have you thought about discussing options with a broker? They sometimes have rates available to them that we can’t get going direct and will know what rates will be available now 

tony863

MFWannabe said:

tony863 said:

jj_43 said:

Their is also the SVT option (probably much higher) but you can leave it anytime, no rush, cut your spending. Keeping options open is worth ££. Rates look peakly atm.

Do you mean SVR? It's 7.83% and kicks in 1st Jan.

I'm keen on getting the questions answered as I'd like to know if I can secure a switch to say a 5.10% 10yr fixed with another lender NOW, but even if I can, are the rates shown on the mse portal likely to be out of date.

Both are key to the question of whether what I'm being offered by Natwest is indeed overinflated, or its more a case that they keep rising and the portal can't keep up.

Rates might look like they're peaking, but the base rate is predicted to hit 6.25 or 6.50% so lenders could be offering 7.3% or thereabouts as normal rates. 

Have you thought about discussing options with a broker? They sometimes have rates available to them that we can’t get going direct and will know what rates will be available now 

Yes, I'm due to speak to her Monday. I'm just reading up on options before we speak so I know roughly what rates are out there. I've just checked the mse portal and there are new 10yr fixed rates at 4.94% which is quite attractive. The question is whether I can secure it now! 

simon_or

tony863 said:

As you can see, the rates available are quite a bit more than the mse portal. 2 questions,

1. Does anyone know if the portal is likely offering rates that have already expired? In other words, am I being offered overinflated rates.

2. Can I secure another mortgage 6 months early with another lender or can I only secure a product switch with my current lender? 

1. Certainly possible that there's a lag. The money-saving expert mortgage comparison tool must link to some third party which collates and updates rates so it's quite possible that it's slightly out of date. Just cross check with the bank's website.

2. Most banks mortgage offers are valid for 6 months, and some can be extended as well. So you should be able to secure a rate now. With most banks to secure a rate you need to submit a full application.

As per my broker, there are a handful of high street banks with whom you can secure a rate more than 6 months in advance. For example Nationwide has a feature that allows securing a rate for 90 days by getting a decision in principle and then another 6 months on the mortgage offer, so you could have secured a low rate back in May.

Too late to make use of that now but maybe put a reminder for next time to check in 8-9 months before your fixed period ends.