Mortgage Options

TOPAZ_2

I need some advice/different points of view on what would be the best way forward.

I have 2 Mortgage accounts with Nationwide - both repayment mortgages as follows

Account 1 £42k Current deal expires this month
Account 2 £137.5k Current deal (5.39%) expires Oct 2009 (current redemption penalites £1800 and reducing each month)

I have an offer on Account 1 of a 5 year fixed rate at 5.63% - just got it before they put all their rates up, and just have to sign and post the paperwork.

My dilema is this - if I take the 5.63% 5 yr fixed offer on Account 1, then in Oct 09 when my larger mortgage deal (Account 2) is due for renewal I will only be able to renew with Nationwide if i want to avoid the 3% redemption penalites on Account 1 - I personally feel that the effects of the so called credit crunch wont have gone by then and Nationwide may still be uncompetitive.

My other option is to go onto the SVR of 6.49% on Account 1 and then in Oct 09 I will have the option to truely shop around for a better deal from the whole of the market - obviously taking the risk that Nationwide dont push up the SVR in the meantime - this has the advantage that I could if I wanted to make unlimited overpayments - although I am not sure that this will happen in reality

Its really a balance of risk and I just wanted to get someone elses point of view

Any comments would be greatly appreciated, and I do realise that its not advice - just an opinion.

Many Thanks
TOPAZ

sarkin

how about asking your lender for a fees free deal with no tie in on accoutn 1 and consolidate the lot in Oct 2009.

TOPAZ_2

I have discussed it with nationwide - and my only option is take one of their deals (in this case 5 years - it has no fee) or go onto the SVR - they dont have any deals for 1 year

Thanks

TOPAZ_2

Should probably mention that they tell me the only deal available without any tie in is the SVR - currently 6.49% (from 1st May)
Thanks

Dick_here

TOPAZ wrote: »

My other option is to go onto the SVR of 6.49% on Account 1 and then in Oct 09 I will have the option to truely shop around for a better deal from the whole of the market - obviously taking the risk that Nationwide dont push up the SVR in the meantime

I'm in a similar situation to you. As the rate that finishes this year for you is much the smaller amount of your mortgages, I'd go with the option above in your situation. The SVR is currently coming down, and if it goes up it won't be unaffordable on 42k.

ThriftyBeanie

You'll always be limited to Nationwide, or face redemption penalties, unless you align both accounts to be free of tie-ins at the same time. If I were you, I would put the £42k on SVR then look to consolidate both next year, when you will have a wider choice.

JimmyTheWig

It pains me to say it, but I think in this case the SVR is the best option. The important thing is to get the bulk of your mortgage on the best rate you can.

By paying the SVR rather than the fixed rate you've got on offer you will pay about an extra £540 over 18 months (i.e. until October 09).
This is much less than either redemption penalty and I am sure that you could save more than this by getting the best deal on the bulk of your mortgage.

In addition to this...
If you've got any savings that you don't need in the next 18 months, then put these towards mortgage account 1.
Shorten the term of the new mortgage as much as you can so that you are paying off as much as you can afford (remember it's a variable rate, though, so allow for increases). The more you pay off the less you will be paying the high interest on.
Can you turn mortgage 2 into interest only without penalty and pay the difference off mortgage 1 every month?

TOPAZ_2

Many thanks for your replies - its good to get some feedback - I always worry that I have missed something really obvious

I think you are right - I will probably have to just bite the bullet and go with the SVR rate on the small amount - so that I have the option to move mortgages to a better rate next year with the large balance next year.

Thanks
TOPAZ