Natwest mortgage rates?

saajan_12

vienly said:

lovemula21 said:

I was asking the OP about their situation in order to offer helpful advice. 

NatWest also have a product transfer for a 5 year fix which is 3.98% without a fee. I was wondering if it was offered here or not because it works out cheaper over the long run. 

They are offering me 5 year fix 3.83% with a £999 upfront fee, borrowing £86k on a property around £450k.
They are also offering what you suggested 5 year fix 3.98% with £0 fee, but I think that works out more expensive as you would be paying 3.83% interest on that additional £999 (extra £191 over 5 years).

So I took whatever was cheapest.

Good to see you've subsequently found the better fee free option, but just for future readers: 
The interest on the fee is a secondary factor and could be avoided if you had the £999 available. 

The primary differentiator is the extra interest (3.98% - 3.83% = 0.15%) on the 86k mortgage vs paying the £999 fee at all.

--Boring maths below--
In the first month, the interest is around £86k x 0.15% / 12 = £7.50 extra, deminishing every month thereafter to around £3.60 in month 60. Over that time, you'll pay around £330 extra in interest on the higher rate. Vs paying a £999 fee, its cheaper to just pay more interest. 

Emmia

saajan_12 said:

Emmia said:

superM said:

I think OP went with a 5-year fixed mortgage with no fee. Would it be better to go for a 2-year fixed with no fee, given the size of his mortgage?

Mortgage interest rates are likely to go down, so in 2 years, rates could be lower than 3.98%, but with a 5-year fix, his rate will remain locked for another 3 years.

At the moment, a 2-year fixed with £30 fee is 4.04%, so the difference isn’t huge.

I think predicting that interest rates will fall or rise is a bit of a mugs game, ultimately if you need a mortgage/remortgage/product switch then you just need to go for the best rate at the time, and once you're locked in, don't keep looking at the rates.

Rates also don't always fall...

When we last renewed our fix I found a low rate with our current lender, my husband was convinced rates would fall further, so we didn't take it... Alas he was wrong. When we really needed to renew, the rate had gone up by about 1%. 

Yes and no.. IMO the point is that the banks have already done the predicting whether rates will fall or rise and factored that into the different rates. 

So I wouldn't necessarily go for the 'best' rate (assuming you mean 'lowest rate' but apologies if not) but rather the product you need. If on a tight budget and you'd rather certainty for longer, then 5 year fix may be better for you. If likely to move in a couple of years, then a 2 year fix may be optimal (yes you can port but that may reduce your options). 

I do think its not wise for posters to advise the 'best' option based on rate predictions - as you say rates don't always fall and its not nearly (at all) clear cut vs say the fee vs no fee decision. 

I meant the best rate for your circumstances - that may be the cheapest overall deal (factoring interest rate/any product fee) it might be a longer fix because you want certainty. It might be a deal you can potentially port, because you're considering moving in the next X years... It might be a shorter fix as you're retiring in X years and plan to pay off the mortgage with a lump sum...

There might be a slightly cheaper rate at another lender, but by the time you've gone through the rigmarole of applying for a new mortgage, it's really not worth it.

My point (which I think you agree with) is there is no one "best deal" it depends on the circumstances of individuals.

superM

Emmia said:

superM said:

I think OP went with a 5-year fixed mortgage with no fee. Would it be better to go for a 2-year fixed with no fee, given the size of his mortgage?

Mortgage interest rates are likely to go down, so in 2 years, rates could be lower than 3.98%, but with a 5-year fix, his rate will remain locked for another 3 years.

At the moment, a 2-year fixed with £30 fee is 4.04%, so the difference isn’t huge.

I think predicting that interest rates will fall or rise is a bit of a mugs game, ultimately if you need a mortgage/remortgage/product switch then you just need to go for the best rate at the time, and once you're locked in, don't keep looking at the rates.

Rates also don't always fall...

When we last renewed our fix I found a low rate with our current lender, my husband was convinced rates would fall further, so we didn't take it... Alas he was wrong. When we really needed to renew, the rate had gone up by about 1%. 

With only £86k left on a £450k property, the LTV is extremely low, which reduces the risk quite a bit.

Of course no one can say for certain what will happen, but the general direction of rates does appear to be downward rather than upward. In that context, a shorter fix can make sense for someone in a strong equity position, even if it isn’t the right choice for everyone.

Ultimately, it comes down to personal risk tolerance and peace of mind. 

I wasn’t advising anyone, just discussing whether it could be a reasonable option in this scenario.

webjaved

Good luck with what you decide to do. Let us know if you lock in for 5 years or 2 years. 

vienly

Thank you all, I decided to go ahead with the 2 year fixed rate no fee.
I am gambling that interest rates will be lower in 2 years time, however if it isn't it's not a deal breaker since my monthly repayments are low enough. 

fergie_

When I was in this position 2y ago with the same lender, I 'gambled' that rates would fall by switching to their tracker. I was right, but they didn't fall as much as expected.

As soon as it was clear that rates were going to stay put, I switched to a 5y fix. At the time there was still a big difference between 2y and 5y - to be worth paying higher interest for 2y, rates would have to have fallen 2 points by now - which they haven't.

So by basically paying 7% interest for a month, I was still able to then save 1% point each month over 5y.

Going onto the SVR would have been something like 12%.