The SVR club

homer_j_3

There seems to have been growing concerns of people who are not sure what they are going to do when their mortgage deal comes to an end.

I have seen many "clubs" on MSE which range from becoming debt free to paying their mortgage off within 3 years. I was wondering whether it was time for a "Prepare a rainy day fund for your mortgage payments club" or "SVR club"

The idea being, if the climate gets to the point where SVR is the only option that you are prepared with some money to help weather the storm.

Personally, I will not hit SVR for 3 years yet but its still too early to see what it's going to be like at that point so maybe there would be others out there that want some ideas and support on how to build up a lump sum of money to help them should they have to hit SVR rate.

For me, SVR rates is still affordable and will be even if they increase but who knows what interest rates will be in the future and I think that this would also help people focus on getting some cash onto the personal balance sheet as such.

Good idea or bad?

beecher

Good idea, though I think a lot of people have their heads in the sand about how it will impact on them. 'it'll be sorted out by then' etc. Best idea for most is to overpay as much as possible I'd have thought to try to avoid having a LTV of more than 90%. Saves being tempted by this lump sum of money too!

homer_j_3

You are right that there will be a lot of people with heads in the sand and I am sure that overpayments are the key but what if rates become much higher?

The overpayments will reduce the debt and the mortgage payments will reduce also. With rising costs of utilities, petrol, food and general cost of living, I think that we need to be building cash stocks up before we start paying the mortgage off. Unless you have a mortgage where draw down is allowed of course.

beecher

homer_j wrote: »

With rising costs of utilities, petrol, food and general cost of living, I think that we need to be building cash stocks up before we start paying the mortgage off.

Surely it is only a wise move if the interest rate you get is higher than the rate you're paying on your mortgage?

Though I suppose if you have a 125% mortgage on a new build, you'd have to be doing a LOT of overpaying to avoid going onto the SVR when your fixed rate runs out. I think they might be the last to take their heads out of the sand though!!

I suppose you're aiming more at people with large mortgages and high LTVs, than those who will be able to easily cope with larger payments and who have a lot of equity at the moment?

Trying_to_be_good

I'm really glad I took out a lifetime tracker last summer - I think this might be the way forward for a lot of people who are prepared to take a bit of risk by not going for a fixed rate, but also don't have to worry about their ability to remortgage in the future.

JUNIOR

My Fixed deal has run out , i am on a SVR(6.25) i've got £57k left:o . I dont think its that bad considering the deals outthere and fees that are added to the loan.

GoToGal

JUNIOR wrote: »

My Fixed deal has run out , i am on a SVR(6.25) i've got £57k left:o . I dont think its that bad considering the deals outthere and fees that are added to the loan.

Have you tried doing a comparison to be sure? I'm pretty sure even with fees you could still be seeing a saving. How much longer do you have to run on your mortgage?

Magic_Dragon

I am just about to go onto SVR at 7.25%! (fixed was 4.59%)

My payments are going from £540 to £842!

I knew the payments would be higher on SVR but I didnt think they would be as big a percentage increase ....

We have a change in circumstances though and are selling and moving into rented accomodation. We will still have to pay the SVR rate until the house is sold though :rolleyes: