New fixed rate + redeeming equity loan

CreditDood

Hi all

After some advice, my Natwest deal comes to an end in March 2024 and I can now choose to lock in a new fixed rate which at 6% for 2 years is pretty horrific even compared to what I'm coming off. 

Personally I can't imagine their so-called deals getting any worse than that, is it best to wait until as late as possible before committing to a new rate in the vague hope that rates might decrease before then?

I also have a help to buy equity loan which I'm paying interest on (isn't much tbh) to which I plan on redeeming and adding to my mortgage balance in the future, but with house evaluations being through the roof I see little to no point in doing this until the inevitable crash (as I pay back 20% of my houses curreny market valuation back to the government and not what they initially lent me) 

My mortgage broker keeps pecking my head about having to do something about the equity loan but I don't see the urgency in the current climate. 

Thanks for any advice 

chanz4

I would look at the deals yourself, your right to leave the equity loan

CreditDood

thanks for the response, yeah I figured as much, going to hold off on that side of things for now

not sure what to do about the mortgage side though, do I wait and hope for the best?

chanz4

CreditDood said:

thanks for the response, yeah I figured as much, going to hold off on that side of things for now

not sure what to do about the mortgage side though, do I wait and hope for the best?

I found rention deals on current lender to be as good as else where

london21

Mine ends February 2024.

What I have done is secure a new rate with current lender and keep an eye on rates, until the deal starts can still be reduced. Towards the end of September secured 2 years fix 65% LTV virgin money 5.7%, noticed the rate dropped slightly so contacted them and today now on 5.49%, until late January the rate can still change if lower will opt for the lower rate and if higher still have my 5.49% secured. 

My lender was previously 4 months prior to re-mortgage, only recently went to 6 months so worth checking to see what is available.

Also what I have done is paid in some savings £6.5k and increased the term by 4 years to reduce the monthly payment slightly as I was paying £1110pm and now going to be around £1550pm.

Better to select the amount you are comfortable with and if chanced can make overpayments. 

They also have the interest only option but personally prefer overpayment but if temporary relief is required, that is also an option. 

I find this helpful to check what rates are with my lender as I did not want to switch, the rates are similar

https://www.moneysavingexpert.com/mortgages/best-buys/?journeyType=remortgage&propertyValue=450000&mortgageAmount=273000&depositAmount=177000&term=30&introTypes=Fixed&introTerms=TwoYears&repaymentMethod=Repayment&sortBy=MonthlyRepaymentAmount&pageNumber=1&addFeeToBalance=false&productNoFee=false&noEarlyRepaymentCharge=false

CreditDood

thanks for that, I'll check with my lender in that case and see if they're open to changing my rate if it drops, want to keep existing term and overpay, interest only doesn't solve the problem only postpones it imo. 

SeagullFTB

I'm a similar boat regarding the Help to Buy equity loan. People, and by people, I mean friends that have no idea what they are talking about, can't grasp the idea that keeping the equity loan at the moment is actually sensible.

We are in year 7 of the loan, so the second year of repayments. I believe interest is around 1.92% on it at the moment. Even with high inflation, I anticipate this to be around 2.1% next year and 2.3% the year (worst case scenario).

This is far cheaper than moving it into the mortgage at 4-6%. Especially as it would also reduce the LTV of the mortgage, likely resulting in even higher mortgage rate offers. If interest rates stay as they are, the equity loan is likely to remain financially beneficial for another 5 years.

The only counter argument to this, is that repaying the loan is 20% of the property value, whatever it may be at that time. If property prices increased in the next 5 years, it could cost several thousand pounds more to repay. But, as property prices are currently dropping, it's likely that this is actually another thing in our favour at the moment.

CreditDood

SeagullFTB said:

I'm a similar boat regarding the Help to Buy equity loan. People, and by people, I mean friends that have no idea what they are talking about, can't grasp the idea that keeping the equity loan at the moment is actually sensible.

We are in year 7 of the loan, so the second year of repayments. I believe interest is around 1.92% on it at the moment. Even with high inflation, I anticipate this to be around 2.1% next year and 2.3% the year (worst case scenario).

This is far cheaper than moving it into the mortgage at 4-6%. Especially as it would also reduce the LTV of the mortgage, likely resulting in even higher mortgage rate offers. If interest rates stay as they are, the equity loan is likely to remain financially beneficial for another 5 years.

The only counter argument to this, is that repaying the loan is 20% of the property value, whatever it may be at that time. If property prices increased in the next 5 years, it could cost several thousand pounds more to repay. But, as property prices are currently dropping, it's likely that this is actually another thing in our favour at the moment.

yes this 100% 

the bubble will burst and there is a crash coming as predicted by many 

makes zero sense to redeem as you say based on current rates and the fact that house prices are sky high - I'll choose to redeem when either thr house value plummets or rates decrease (the latter seems more likely)

CreditDood

is there much sense in going through a broker in the current climate? Can't imagine they'll be able to provide better rates (or anything significant) off what is publicly advertised right now. I ain't getting below 5% no matter what avenue I take imo. 

amnblog

There are few Lenders that will accept a re-mortgage with the Equity Loan still in place and I expect you will end up staying with Nat West which wont do you much or any damage.