MSE News: Co-op launches lowest-ever five-year fixed mortgage

I am torn between this and my base +1.99% offset tracker.

anselld wrote: »

It is still 4.1% when you factor in the fees.

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).

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...

anselld wrote: »

4.1% APR quoted, but that does depend on the size of the mortgage.

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 wrote: »

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.

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.]