What would you do

simon_or

tony863 said:

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say a 5.10% 10yr fixed with another lender NOW, but even if I can, are the rates shown on the mse portal likely to be out of date.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! 

If it's a specific rate and bank then just go to their website and see if you can start or conplete an online application, that might secure the rate.

tony863

So I thought I'd provide a quick update in case others are reading this in similar circumstances, wondering what options they may have.

It's realistically come down to 5 options:

1. Interest only - the new rules mean lenders have to consider it for 6 months. 

2. Extend the period - as previously said, barclays for one will extend to 80yrs old. 

3. Swallow the payments and make significant adjustments to our life to offset the impact 

4. Opt for something similar to an offset mortgage by committing savings into the equation. 

5. Move house, downsize and start again on a lower mortgage

Option 1 wasn't an option unless it was all coming to a head. Option 2 wasn't attractive for reasons already covered. Option 3 was possible but painful, so it was either 4 or 5. Option 5 is still in consideration, but at the moment, we are leaning towards option 4. Here's what it looks like:

1. consolidate most of our life savings to accumulate £30k lump sum. We will still have a small amount left over but not much. 

2. Overpay the current mortgages to minimise interest vs capital between now and end December. 

3. Consolidate the second mortgage (due June 24)

The result takes my mortgage forecast from £282k over 17yrs, on 10yr fixed at 4.94% = £2034pm (+£364 vs what we pay combined now). This is what it looks like with the £30k down now and 5 months less interest - £251k, over 17yrs, on same deal for £1821pm (+£151 compared to what we pay now). 

I get that I'm losing my £30k life savings, but the argument is that my savings are just reducing the amount of 'dead money' being paid in interest. To put it into context, it's £213 less per month than it would be otherwise. Over 10yrs this equates to £25.5k we would have otherwise paid in interest. 

There is an option to go 5yr fixed aat 5.25% but having a real term increase of £151pm feels doable in the climate and gives us peace of mind for a decade. 

What do others think? 

MFWannabe

tony863 said:

So I thought I'd provide a quick update in case others are reading this in similar circumstances, wondering what options they may have.

It's realistically come down to 5 options:

1. Interest only - the new rules mean lenders have to consider it for 6 months. 

2. Extend the period - as previously said, barclays for one will extend to 80yrs old. 

3. Swallow the payments and make significant adjustments to our life to offset the impact 

4. Opt for something similar to an offset mortgage by committing savings into the equation. 

5. Move house, downsize and start again on a lower mortgage

Option 1 wasn't an option unless it was all coming to a head. Option 2 wasn't attractive for reasons already covered. Option 3 was possible but painful, so it was either 4 or 5. Option 5 is still in consideration, but at the moment, we are leaning towards option 4. Here's what it looks like:

1. consolidate most of our life savings to accumulate £30k lump sum. We will still have a small amount left over but not much. 

2. Overpay the current mortgages to minimise interest vs capital between now and end December. 

3. Consolidate the second mortgage (due June 24)

The result takes my mortgage forecast from £282k over 17yrs, on 10yr fixed at 4.94% = £2034pm (+£364 vs what we pay combined now). This is what it looks like with the £30k down now and 5 months less interest - £251k, over 17yrs, on same deal for £1821pm (+£151 compared to what we pay now). 

I get that I'm losing my £30k life savings, but the argument is that my savings are just reducing the amount of 'dead money' being paid in interest. To put it into context, it's £213 less per month than it would be otherwise. Over 10yrs this equates to £25.5k we would have otherwise paid in interest. 

There is an option to go 5yr fixed aat 5.25% but having a real term increase of £151pm feels doable in the climate and gives us peace of mind for a decade. 

What do others think? 

You say that would leave some savings but not much? 

What would the payments be if you used less savings? Say 20k? 

simon_or

tony863 said:

3. Consolidate the second mortgage (due June 24)

You've said "Consolidate the second mortgage (due June 24)". What did you mean by that? Is your NatWest mortgage in 2 parts - one ending December and the other in June 2024?

If so, then you won't be able to change banks in December without taking both parts with you to the new bank and paying ERC on the part ending in June 2024.

housebuyer143

Who are you looking at for offset mortgages because there are only a few contenders and they come with a higher fee than the normal fixed rates or trackers and have higher fees.
£30k to offset on a loan that large isn't really worth it in my opinion and you seem to have ignored the fact that your life savings can be earning 5% in the bank if not more, so are you really any better off with the offset when you consider all this? 

Are you actually considering throwing your life savings into the mortgage as in just making an overpayment? This might not be the best move as you might need these for emergencies and again you are neglecting to consider the savings interest you can get which will be close or more than that 10yr fixed rate. 

If it's really going to be that hard to pay the mortgage and live your life and there is no prospect to earn more soon then I would probably downsize in your position. Houses come with maintenance costs and what happens when you have a massive issue that needs fixing? Will you end up in debt? 

[Deleted User]

One of mine is due to end in Feb and would be tempted to go for 3 or 5 years.

10 years is too long for me, I have a feeling rates will reduce in the next 12-36 months once inflation start to reduce.

MFWannabe

OP have you come to a decision? 

News today that most lenders are now 6% fixed rate I don’t think you can afford to deliberate for too much longer? 🤔
Are you still able to get the rates you mentioned? 

tony863

Sorry, long day trying to sort this out. I hear all the reasons, but the reality for me right now is that I haven't got time to move and downsize before the mortgage comes to am end, so that option was not realistic to suggest.

It comes down to what you can afford and for me, I was facing having £30k in savings (albeit earning 5% interest) but none of that would have mattered if I can't afford to live!

I've ended up arranging bulk payments on my mortgages to avoid ERCs between now and Dec. Then I'll consolidate the mortgages together (-£30k) and pay a few hundred in ERC of 0.75% on the other mortgage.

We applied for a 10yr fixed at 4.94% and got confirmation of AIP this evening and notification it was being processed under those terms. We were told the rates are changing again tomorrow, but whether they do or not I'm not sure.

For what it's worth, I think the rates will remain high for 5yrs, but I don't expect them to be high going into the second half of our period. The key thing you've got to ask yourself is whether you can afford the remortgage at the 5yr point (or 2 or 3 if you're feeling brave) if the base rate hits 6.5% and lender rates are 7.5%.

To put that into reality, our 4.94% payment is £1821 whereas a 7.25% is £2143 (+£322). There's no way I could afford that, so why put ourselves through the stress of worrying? I completely accept there's an equal argument to the other side of the coin. I'm not trying to convince anyone. I'm simply saying that for me, it was a case of being comfortable with an increase of £151pm considering the average 2yr fixed is now 6%+

MFWannabe

Glad you’ve managed to still get a decent rate 
You have to make the decision based on your thoughts and affordability, also as you state peace of mind and not put yourself through more stress of worrying 

simon_or

Great outcome. If you set aside the crystal ball aspect of predicting rates, how long to fix for is a very individual question and you've arrived at the right answer for yourself which is great.

The eventual outcome in ££ may or may not be in your favour, but even then the decision is correct for you 👍

https://www.moneysavingexpert.com/news/2015/02/the-secret-to-avoiding-bad-financial-decisions/