5 year fix ending 2025 - what will my current lenders AVR be based on?

sheffstevie

my 5 year fix ends next year with Bank of Ireland. The property is worth about £225K and the remaining amount of mortgage will be approx £30K  How will the bank calculate monthly amounts? The original figure from 5 years ago? ( when the property was worth less?)  I'll be 63 next year and currently retired so what can I expect them to ask me to pay each month. I've read that it sometimes can be worth going onto the current lenders AVR after term end if there's not a great deal of mortgage to repay but haven't seen any figures to help with this statement.

sammyjammy

You'll struggle to remortgage generally with that kind of debt remaining but you should be able to move to a new product with your existing provider, that would be calculated on the houses value at the time and how much you owe.

sheffstevie

Ok thanks for the reply - but I'm still in the dark how the banks work this stuff out and would like to get an idea before I ring them and get blinded by jargon by a sales person. I remortgaged in 2019 with 10 years left on my previous lenders agreement so after paying off the 5 year fixed mortgage I suppose I have 5 years left with 30k owing to my current lender - If I had 30k spare I would be happy to pay off the balance and be mortgage free but unless Lady Luck shines on me in the next 7 months I don't think that will be an option. What do you think the current lender is likely to do and what other options could there be if you think I'd struggle to remortgage with only 30k owing?

BarelySentientAI

I'm struggling to understand your question - unless there's something unusual about your situation that I'm missing.

You have a mortgage that will have 5 years left to run and a balance of 30k.

Your payments will be based on 5 years and 30k balance, at whatever interest rate that is.  Somewhere between 4% and 10% at the moment it seems.  Just like every other mortgage payment ever was.  Balance, term and interest rate.

Why does the value of the property matter?  You're obviously not worried about LTV at this point.

You might not be able to remortgage because the balance is small.  That doesn't stop you picking from all the rates on offer from your current lender - fixes, trackers, SVR.  People say that you might want to go onto SVR because there are no early repayment charges and when the balance is small the interest rate doesn't matter as much as when the balance is big, so if you suddenly came into some money you could pay a chunk off without penalty.

What am I missing?

lfc321

Bank of Ireland will write to you closer to the end date of your current deal. At that point, you will be able to choose a new deal from the rates they have on offer at that time, or go onto their SVR. No-one at the moment can tell you what the deals in 2025 will be, nor what the SVR will be. A reasonable guess would be fixed rates at somewhere around 4-5%.

The term of the mortgage (i.e. the date you are due to pay it off - which sounds like 5 years) will remain the same as it is now, unless you choose to alter it. The monthly repayments will be calculated according to the interest rate (unknown), amount owing (£30K), and term remaining (5 years).

As others have said, switching to a new lender (with a small amount owing, and being retired) might not be easy. So it is quite possible a new deal with BoI will be your best option.

You will probably find that the SVR will be quite a bit higher than a fixed or tracker deal although, as BarelySentient says, it would allow you to pay it off early without penalty if you came into some money. You can have a look at the sums and weigh up the pros/cons once you know the rates BoI are offering at the time. Personally, I think if I were retired I would be looking at a fee-free fixed rate deal to have certainty about the repayments, but that's a choice for you.

amnblog

You original offer would have been based on £225,000 paid offer over the mortgage term of 10 years with 5 years on the fixed rate, moving to the remaining years on standard variable rate.

Your original offer will show a change in monthly payments as the 5 year fixed ends.

That revised payment would be based on the standard variable rate applicable at the time, expect it to be much higher today.

With just £30,000 left to pay, the mortgage interest will be small amount of the monthly payment and the majority of your payment will be reducing capital.

Clearly you need to discuss your options with the Lender. If you do nothing expect to pay a higher monthly figure than that shown against the standard variable rate on the offer of 5 years ago.