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  • FIRST POST
    • Former MSE Helen
    • By Former MSE Helen 26th Nov 12, 2:40 PM
    • 2,324Posts
    • 971Thanks
    Former MSE Helen
    MSE News: Co-op launches lowest-ever five-year fixed mortgage
    • #1
    • 26th Nov 12, 2:40 PM
    MSE News: Co-op launches lowest-ever five-year fixed mortgage 26th Nov 12 at 2:40 PM
    "The deal has prompted brokers to suggest homeowners consider fixing their mortgage given the ultra-low offers available..."

Page 1
    • michaels
    • By michaels 26th Nov 12, 6:47 PM
    • 22,822 Posts
    • 104,519 Thanks
    michaels
    • #2
    • 26th Nov 12, 6:47 PM
    • #2
    • 26th Nov 12, 6:47 PM
    Get with the programme MSE Helen

    Last week: http://forums.moneysavingexpert.com/showthread.php?t=4301429
    Cool heads and compromise
    • michaels
    • By michaels 26th Nov 12, 6:48 PM
    • 22,822 Posts
    • 104,519 Thanks
    michaels
    • #3
    • 26th Nov 12, 6:48 PM
    • #3
    • 26th Nov 12, 6:48 PM
    I am torn between this and my base +1.99% offset tracker.
    Cool heads and compromise
    • anselld
    • By anselld 27th Nov 12, 5:49 AM
    • 6,431 Posts
    • 6,372 Thanks
    anselld
    • #4
    • 27th Nov 12, 5:49 AM
    • #4
    • 27th Nov 12, 5:49 AM
    I am torn between this and my base +1.99% offset tracker.
    Originally posted by michaels
    It is still 4.1% when you factor in the fees. If rates remain unchanged then your tracker remains 2.49% (assuming it is lifetime). That is of course a gamble, but BoE base is currently forecast to remain unchanged for the next 3 years. If you have the money to pay the coop fees now I would save it as offset/overpayment instead personally.
    • JimmyTheWig
    • By JimmyTheWig 27th Nov 12, 8:54 AM
    • 11,885 Posts
    • 11,412 Thanks
    JimmyTheWig
    • #5
    • 27th Nov 12, 8:54 AM
    • #5
    • 27th Nov 12, 8:54 AM
    It is still 4.1% when you factor in the fees.
    Originally posted by anselld
    No it's not.
    Fees work out at 200 a year, when split over the five years of the deal (which I think is a reasonable thing to do).
    If you've got a 100k mortgage the fees are the equivalent of 0.2% a year. Which makes it 2.99% when you factor in the fees.

    Just depends on when and by how much you think rates will rise, doesn't it. (And, to some extent, how quickly you are repaying your mortgage.)
    No change for three years then a 1% rise which remains for two years means michaels would be better off on their existing mortgage.
    No change for three years then a 1% rise followed by another 1% rise a year later would mean michaels would be better off switching (unless they can pay off a significant chunk in the next 3-4 years to make the rate in the 5th year less relevant).
    • anselld
    • By anselld 27th Nov 12, 8:50 PM
    • 6,431 Posts
    • 6,372 Thanks
    anselld
    • #6
    • 27th Nov 12, 8:50 PM
    • #6
    • 27th Nov 12, 8:50 PM
    No it's not.
    Originally posted by JimmyTheWig
    4.1% APR quoted, but that does depend on the size of the mortgage.
    I would still prefer to pay off 1000 of my mortgage than sink it into fees.
    • michaels
    • By michaels 27th Nov 12, 8:57 PM
    • 22,822 Posts
    • 104,519 Thanks
    michaels
    • #7
    • 27th Nov 12, 8:57 PM
    • #7
    • 27th Nov 12, 8:57 PM
    I see it more as an interest rate punt, I pay 80pcm initially for a potential killing if rates do rise. Currently my offset is fully drawn down as I am making a profit on the turn. Max out the term to keep the principal as high as possible (as IO is not allowed) and if rates do rise sharply I could be effectively borrowing at 2.86% and earning what? 5+% on a couple of hundred k - good money if you can make it...
    Cool heads and compromise
    • Pincher
    • By Pincher 28th Nov 12, 2:33 AM
    • 6,516 Posts
    • 2,491 Thanks
    Pincher
    • #8
    • 28th Nov 12, 2:33 AM
    • #8
    • 28th Nov 12, 2:33 AM
    I operate under the ten year cycle theory.

    Boom in 1987, 1997, 2007
    Bottom in 1992, 2002, 2012

    My last five year fix was 2003 to 2008 at 4.99%.

    The dream scenario is a five year fix at 2.5% from 2014, but I expect the best deals will be in 2013.

    Don't ask me for a justification, it's just a theory.
    • JimmyTheWig
    • By JimmyTheWig 28th Nov 12, 8:14 AM
    • 11,885 Posts
    • 11,412 Thanks
    JimmyTheWig
    • #9
    • 28th Nov 12, 8:14 AM
    • #9
    • 28th Nov 12, 8:14 AM
    4.1% APR quoted, but that does depend on the size of the mortgage.
    Originally posted by anselld
    Oh, I see.
    Yes, the APR does take into account the fees (and so must depend on some sort of assumption for the size of the mortgage) but more relevantly the APR is for the whole term of the mortgage.
    Given that the usual term is 25 years then the follow on rate (SVR, or whatever, for 20 years) will be more relevant to the APR than the deal rate (fix for 5 years). But in reality, most people would remortgage at some point after the deal has finished and so I never look at the APR for a mortgage.
    • Consumerist
    • By Consumerist 28th Nov 12, 11:37 AM
    • 5,247 Posts
    • 2,630 Thanks
    Consumerist
    Given that the usual term is 25 years then the follow on rate (SVR, or whatever, for 20 years) will be more relevant to the APR than the deal rate (fix for 5 years). But in reality, most people would remortgage at some point after the deal has finished and so I never look at the APR for a mortgage.
    Originally posted by JimmyTheWig
    I've just run this through a spreadsheet and my results indicate that re-mortgaging after the 5-yr fixed-rate deal on a 100,000 loan (initially over 25 years) would give an effective APR of 3.03% over the 5-yr term. Loans of greater than 100,000 reduce the effect of the 999 fee and, accordingly, will reduce the effective APR over the 5-yr period.
    Last edited by Consumerist; 28-11-2012 at 11:42 AM.
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • JimmyTheWig
    • By JimmyTheWig 28th Nov 12, 1:17 PM
    • 11,885 Posts
    • 11,412 Thanks
    JimmyTheWig
    I've just run this through a spreadsheet and my results indicate that re-mortgaging after the 5-yr fixed-rate deal on a 100,000 loan (initially over 25 years) would give an effective APR of 3.03% over the 5-yr term. Loans of greater than 100,000 reduce the effect of the 999 fee and, accordingly, will reduce the effective APR over the 5-yr period.
    Originally posted by Consumerist
    Close enough to the 2.99% I estimated, so I'm happy to agree with that.

    [I wish this figure (2.99% / 3.03% / whatever) was quoted on mortgages. I think it's the most important one to be able to compare like with like, but it's the one bit of information that we are not given.]
    • Consumerist
    • By Consumerist 28th Nov 12, 1:30 PM
    • 5,247 Posts
    • 2,630 Thanks
    Consumerist
    [I wish this figure (2.99% / 3.03% / whatever) was quoted on mortgages. I think it's the most important one to be able to compare like with like, but it's the one bit of information that we are not given.]
    Originally posted by JimmyTheWig
    I think the problem is that the overall APR will depend on the amount borrowed and the initial mortgage term; these will vary from borrower to borrower.
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • JimmyTheWig
    • By JimmyTheWig 28th Nov 12, 4:22 PM
    • 11,885 Posts
    • 11,412 Thanks
    JimmyTheWig
    I think the problem is that the overall APR will depend on the amount borrowed and the initial mortgage term; these will vary from borrower to borrower.
    Originally posted by Consumerist
    Both of these could be based on industry-wide assumptions. As they are now, presumably.
    • Consumerist
    • By Consumerist 28th Nov 12, 5:12 PM
    • 5,247 Posts
    • 2,630 Thanks
    Consumerist
    Both of these could be based on industry-wide assumptions. As they are now, presumably.
    Originally posted by JimmyTheWig
    I'm not sure how that might work when these deals include an up-front fee to skew the underlying APR.

    I like the simplicity of your methodology above which seems logical and accurate enough for comparison purposes over the relatively short periods of these deals. The small error in your results would apply to all deals being compared so making the comparison valid.

    Since the arithmetic is simple, I would rather rely on your basis of comparison than anything the banks might dream up.

    How about you?
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • JimmyTheWig
    • By JimmyTheWig 29th Nov 12, 8:11 AM
    • 11,885 Posts
    • 11,412 Thanks
    JimmyTheWig
    Since the arithmetic is simple, I would rather rely on your basis of comparison than anything the banks might dream up.

    How about you?
    Originally posted by Consumerist
    While _I_ would still work it out myself (at least until I was happy with the way the banks were doing it) I don't think many people look at it the way I look at it.
    The point is that someone in this thread has looked at the APR of the mortgage and decided that it wasn't worth it. Assuming that they weren't planning on staying on the SVR for 20 years then I think anything the banks do would be better than an APR for a mortgage.
    • Consumerist
    • By Consumerist 29th Nov 12, 2:10 PM
    • 5,247 Posts
    • 2,630 Thanks
    Consumerist
    The only way I can think of to accomplish any meaningful result is to produce APR tables for loan amounts and durations. There would then need to be separate tables for each initial term.

    I really don't see banks going down that route voluntarily. I reckon we're going to be on our own and relying on such things as spreadsheets or possibly independent web sites for that sort of information.
    Warning: In the kingdom of the blind, the one-eyed man is king.
    • michaels
    • By michaels 6th Dec 12, 7:27 PM
    • 22,822 Posts
    • 104,519 Thanks
    michaels
    Anyone heard any rumours on how long this rate might be available? No one else seems to have followed the lead.
    Cool heads and compromise
    • latecomer
    • By latecomer 7th Dec 12, 7:37 AM
    • 4,619 Posts
    • 2,626 Thanks
    latecomer
    No idea but our paperwork was delivered yesterday (following phone application the week before). I'm hoping its a relatively quick decision but we dont need it before the 1st Feb so no huge rush.

    They did quick 6-8 weeks for processing though.
    • kingstreet
    • By kingstreet 7th Dec 12, 8:36 AM
    • 35,520 Posts
    • 19,419 Thanks
    kingstreet
    Those waiting until the second quarter of 2013 are likely to see some very attractive deals popping up. Lenders taking advantage of the "funding for lending" scheme will have to lend what they committed to, or will face penalty charges.

    They will face two options - cut rates and reduce their margin on low LTV stuff, or lend at higher LTVs. I'm not sure there will be a great appetite for the latter.

    Lenders who have previously paid more for their money will be able to borrow and lend at significantly lower rates, (LBG, RBS, Santander) bringing them a lot closer to the likes of HSBC, now all those taking advantage of FFL are effectively on a level playing field.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • michaels
    • By michaels 7th Dec 12, 12:17 PM
    • 22,822 Posts
    • 104,519 Thanks
    michaels
    No idea but our paperwork was delivered yesterday (following phone application the week before). I'm hoping its a relatively quick decision but we dont need it before the 1st Feb so no huge rush.

    They did quick 6-8 weeks for processing though.
    Originally posted by latecomer
    I was wondering if I could pay the 150 quid booking fee and then get them to move very slowly so that I had an option t move to the fixed rate but could change my mind if something better came up or even just that I decided to stay on floating...

    Those waiting until the second quarter of 2013 are likely to see some very attractive deals popping up. Lenders taking advantage of the "funding for lending" scheme will have to lend what they committed to, or will face penalty charges.

    They will face two options - cut rates and reduce their margin on low LTV stuff, or lend at higher LTVs. I'm not sure there will be a great appetite for the latter.

    Lenders who have previously paid more for their money will be able to borrow and lend at significantly lower rates, (LBG, RBS, Santander) bringing them a lot closer to the likes of HSBC, now all those taking advantage of FFL are effectively on a level playing field.
    Originally posted by kingstreet
    Sounds good but how does the increase in 5 year libor due to the expected AAA downgrade impact what rates might be available?
    Cool heads and compromise
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