Changing mortgages - can I fix till end of term?

MarkyMarkD

john_s wrote: »

What a complicated web they weave! So I presume they WILL have benefited from rates rising since I fixed five years ago at 4.29%? Or did that not work in their favour either?

No. If you take out a fixed rate mortgage, the lender's margin is fixed at the time you take the mortgage. Consequent increases or decreases in rate make no difference to the lender at all. And that's why they require a penalty for early redemption - they could be left completely stuffed, having to pay an onerous rate on a swap which they no longer require.

(Obviously, they could also benefit, if the swap rate is lower than current rates. But when lenders - NatWest in particular - had redemption penalties fairly calculated to exactly reflect the amount of their losses, consumers' champions kicked off when customers were asked for penalties of £25,000 and upwards after rates fell like a stone. So lenders have universally gone for flat rate penalties which bear no resemblance to their costs but go some way towards ameliorating their losses if they arise).

ratchycakes Good suggestion - that sounds perfect for someone in John S's position.

john_s_2

If you take out a fixed rate mortgage, the lender's margin is fixed at the time you take the mortgage.

But in your first post you said:

"They also won't have made any money on your 5 year mortgage at 4.29%, so I don't see why you think they owe you anything."

So for my recent five year fix are you saying they fixed a profit margin of zero? Sorry if I'm being thick, I'm a bear of very little brain!

Thanks rachycakes, I'll look into that one as well.

MarkyMarkD

When I say "nothing" I mean "next to nothing". Their fixed margin will have been very low because 4.29% is a very low rate for them to have charged you. I don't know what 5 year swap rates were at the time you took it out, but I doubt they were under 4%.

john_s_2

Hi MarkyMarkD

That makes sense. Thanks for your patient explanations of how fixed mortgages work - as you can see, I had no idea!

At the end of the day I've looked at this from my point of view (why shouldn't I?) and all I know is that for a fair proportion of the first three years I was paying considerably over the odds, and for the last five I've been paying slightly under the odds. So (from my point of view) I'm even.

I accept (from your explanations) that it isn't Skipton who have either benefited or lost from these two scenarios but, to be brutally honest, who has been benefiting or losing is not really my concern. I don't think it was unreasonable for me (given my previous ignorance) to have assumed it was my lender.

The five year fix I took out was on general sale - it suddenly appeared in the Saturday Times' Best Buy tables. In fairness to Skipton they let me take it - I'm aware a lot of lenders only make their best deals available to new customers.

I wouldn't hesitate to recommend Skipton to anyone; they have been good to me for the last 17 years. Which is why I will seriously consider staying with them for the remainder, even if I can get slightly cheaper elsewhere.

And thanks again to others who have given suggestions.

dimbo61

if you could afford to do this could you take the fee free 5.99% deal over 5 years on a repayment basis with skipton and overpay as much as you could afford. no cost to change onto and if you overpay by 10% a year
you would end up with your mortgage nearly paid for and the endowment
as future savings . not the cheapest option but MF in five years and 34/51K in the bank. GOOD LUCK

MarkyMarkD

I appreciate your comments, john s. A lot of people who make the wrong gamble on fixed rates think that their lender has been profiteering from them as a result, but it's not the case at all. And if people make the right gamble on fixed rates, they might (if they cared) think that their lender has got stuffed as a consequence, but this equally is not the case. The risk in either case has been passed on by the lender to others in the financial markets.