Which Mortgage to go for?

[jrb]

My mortgage is up at the end of May so I need to get a new one. I've been looking for a while, but I still can't make my mind up. I'm leaning towards a fixed mortgage ATM. I'd prefer a 5 year fixed, but the offers aren't that great and I would only save about £50-£100 per month on my current mortgage of £720 a month. I'm after a greater saving TBH. I've looked at 3 year fixed mortgages, which offer better savings, roughly £150-£170 a month. Apparently fixed rate mortgages won't go any lower and now is the time to get one before they start going up again.(Last Nights MEN and other websites) I'm still tempted by a tracker mortgage though, saving £200-£220 a month. However, I'm concerned that the base rate will start to rise again either this year or early next year. Most deals are for two years only and the fees involved are around the £1000 mark.(ouch!)

In a nutshell. What mortgage should I go for and just out of interest what mortgage have you currently got or what mortgage are you currently looking for. Any advice from SSC financial advisors or mortgage brokers would be welcome. Thanks.

[yoshef]

Have you thought about lending over a longer term for a few years and then shorten the term when you're comfortable with the repayments? That should take a bit of the bite out of the repayments. You can also save a few bob on the repayments by paying some of the fees up front rather than lumping them in with the loan. Ouch indeed, but its cheaper in the long term!

The tracker mortgages are tempting I know, but personally I wouldn't get one unless I was very comfortable I could afford to fart around changing the loan if the interest rates shot up. IIRC there were a few lenders (nationwide was one i think?) that had tracker mortgages that you could "fix" at short notice, but I'm not sure if they'd still available in the current climate, maybe thats worth looking into? I'd always tend to veer towards a fixed rate myself unless I felt I could comfortably cover a big hike (7%-15%) in the base rate, but thats me, unwilling to gamble my home

I'm currently a couple of years into a 5 year fixed period, can't remember the rate off the top of my head think it was 5%, which i suppose isn't that great at the moment, but i'm comfortable with the amount im repaying a month at the moment. I can also overpay up to £500 a month without getting hit with an early redemption fee too, which I think comes straight off the capital balance, so the repayments go down, although I haven't done that yet.

With regards to advice, a good source for this sort of stuff is Martin Lewis's site, http://www.moneysavingexpert.com It's also worth registering on their forums and asking around there. http://forums.moneysavingexpert.com/ They have a few mortgage brokers and financial adivisors hanging around giving impartial (and partial!) advice.

[jrb]

Originally Posted by yoshef

Have you thought about lending over a longer term for a few years and then shorten the term when you're comfortable with the repayments? That should take a bit of the bite out of the repayments. You can also save a few bob on the repayments by paying some of the fees up front rather than lumping them in with the loan. Ouch indeed, but its cheaper in the long term!

The tracker mortgages are tempting I know, but personally I wouldn't get one unless I was very comfortable I could afford to fart around changing the loan if the interest rates shot up. IIRC there were a few lenders (nationwide was one i think?) that had tracker mortgages that you could "fix" at short notice, but I'm not sure if they'd still available in the current climate, maybe thats worth looking into? I'd always tend to veer towards a fixed rate myself unless I felt I could comfortably cover a big hike (7%-15%) in the base rate, but thats me, unwilling to gamble my home

I'm currently a couple of years into a 5 year fixed period, can't remember the rate off the top of my head think it was 5%, which i suppose isn't that great at the moment, but i'm comfortable with the amount im repaying a month at the moment. I can also overpay up to £500 a month without getting hit with an early redemption fee too, which I think comes straight off the capital balance, so the repayments go down, although I haven't done that yet.

With regards to advice, a good source for this sort of stuff is Martin Lewis's site, http://www.moneysavingexpert.com It's also worth registering on their forums and asking around there. http://forums.moneysavingexpert.com/ They have a few mortgage brokers and financial adivisors hanging around giving impartial (and partial!) advice.

Thanks for the advice Yoshef.

I've gone for the Chelsea BS 3 years fixed at 3.74%. It doesn't tie me in for 5 years, which I'd looked at, and I'm sure in 2-3 years time mortgage rates will be on a level par with the Chelsea BS offer, so I won't have over paid either. I can also lump my £995 arrangement fee into the mortgage if I like, instead of paying it up front. My mortgage payments will come down from £720 to £550, saving £170 a month. I'm still looking mind, hoping to find an even better deal. Getting an extra £170 a month or £42.50 per week in wages will make a big difference. It's like looking forward to a pay rise at the end of May.

[Molly]

I'd go for the 10 year fixed rate @ 4.75%. (give or take.) %5 isn't a bad rate in the long run.

By the time the deal has run out the value of the mortgage will have depreciated and at any % it will be nothing too much to pay.

[b4mmy]

mine's interest only with no penalty for paying off the equity.... strongly suggest you go for that if you can find one these days.

[Molly]

mine is an interest only tracker - although I do have seperate and extreemely unrewarding endownments to cover part of it if we die.

Again the depreciation on the amount is so high it will be nothing to pay off when the 25 years is up so there is no need to worry about paying off any of the loan.

[b4mmy]

thats the way I looked at it Molly...

[Tubeman]

I have an interest only tracker too... Payments have gone down from over £800pm to £46pm in just over a year... It's unbelievable! Just £46 interest on £200k every month... the price of a ticket to The Emirates. For many of us this is a land of milk & honey not a time of hardship... The vast majority of people are net borrowers rather than savers so the interest rates are a boon.

I'm putting the difference into an ISA, so that when / if I remortgage it will be for a lot less.

[jrb]

The problem with a interest only repayment tracker is that you have to pay the amount borrowed at the end of term. Now if I had 60-70G burning a hole in my bank account, I would definitely go for an interest only mortgage, unfortunately I haven't. Interest rates are only heading one way and that's back up. Indicators show the shoots of recovery are starting to surface, which will only mean interest rate rises are on the horizon. This has stopped me going for a tracker, knowing I could be paying between 0.5% to 1.5% extra within a year. My main goal at the moment is to get my payments down and keep them down for as long as possible. A 5 year fixed mortgage sounds great, but most are coming in around 4.5% and higher, which will only take my mortgage down by £100 on average. The Chelsea 3.74% saves me an extra £70 a month. OK it finishes two years earlier than a 5 year mortgage, but in that period of time I will have saved almost £3000 extra in mortgage payments compared to a 5 year 4.5 % mortgage. If we were at the beginning of the recession I would definitely go for a tracker, but the general feeling is that we've reached the bottom of the recession and by this time next year we will be heading out of recession and things will be picking up again across all fronts. Opting for a tracker will only mean higher payments. Surely a fixed rate is a no brainer?

[dinp]

My mortgage is also up for renewal this year (Aug) and at the minute i'm on a fixed deal at a rather unimpressive 5.99%. I'm paying less than £500 a month as it is so if I can fix it at a lower rate again, hopefully at around the £400 a month mark then i'll be happy. Although I am tempted to leave it on the base rate for a few months, as that is currently 2.5%!

[b4mmy]

Jerb this IS the beginning

[wiggleyleeds]

hmm, thats a point, why not just leave it at the standard variable rate? presumebley they are all around 3% - and then next year, just before summer, lock into 3 or 5 year fixed rate at 4.5%. You have to remember that banks are currently clawing back shit loads of money, which is why their is a huge disparity between the BoE rate, and the products offered by mortages companies. In a year.. this disparity will lesson, as the neccesity to do so lessons, and compettiveness comes back, so even in a year and a half when things start looking up, the fixed rate products will still be 4.5%, even if BoE rate say goes up to 3%, or even 3.75% so there is no reason to lock into a stupidly high fixed rate right now.

[jrb]

Originally Posted by b4mmy

Jerb this IS the beginning

of the end for me.

Chris, the shoots are starting to appear. The G20 have agreed in principal, shares are gaining, house prices are rising again and estate agents are reportring more interest and increased sales. Give it a year and things will be much better.

Now is the time to increase your pension contributions once more and invest in bricks and mortar. House prices have bottomed out or will have by the middle of the year. The cycle has started again.

Oh! The Woolwich are offering a 4 year fixed at 3.99% (Chelsea 3 year fixed at 3.74%) That would take my payments to £558 per month for the next 4 years.

Wiggs. I just can't see the base rate staying at 0.5% for the next 12 months.
Can you? Alliance and Lei are currently at 2.79% and First Direct are at 2.89%. They are the best tracker/variable deals ATM. Both two years. Both are roughly 1% below the Chelsea. That 1% difference could be gone within a year or two.

[wiggleyleeds]

I dont think you got what I meant there. Normally, trackers are around 0.5% or 1% above base rate for the two year promotional period. Right now,trackers are a staggering 2.5% above base rate (because banks are desperatly trying to claw back extra cash). In a years time, yes the base rate will have gone up, but the 2.5% disparity will have reduced closer or back to the traditional 0.5/1% above, as banks become competetive again and dont need to claw back in such excess.

So, the point being, yes, you could lock into a 5year fixed, at 4.5% right now, which would be crazy. It would make more sense to stay on the SVR (which is 3 - 3.5% right now), and then as soon as the base rate starts to rise to reach 4.5%, *then* do you r lock in thing, because the fixed rate will still be 4.5% - if anything the will come down. Why will the fixed rate still be 4.5% you ask? Because the disparity will reduce to traditional competetive levels. Dont forget, even over a year ago, when the base rate was around 5% or above, you could get 2 year fixed rates for 4.75%.

[jrb]

Originally Posted by wiggleyleeds

I dont think you got what I meant there. Normally, trackers are around 0.5% or 1% above base rate for the two year promotional period. Right now,trackers are a staggering 2.5% above base rate (because banks are desperatly trying to claw back extra cash). In a years time, yes the base rate will have gone up, but the 2.5% disparity will have reduced closer or back to the traditional 0.5/1% above, as banks become competetive again and dont need to claw back in such excess.

So, the point being, yes, you could lock into a 5year fixed, at 4.5% right now, which would be crazy. It would make more sense to stay on the SVR (which is 3 - 3.5% right now), and then as soon as the base rate starts to rise to reach 4.5%, *then* do you r lock in thing, because the fixed rate will still be 4.5% - if anything the will come down. Why will the fixed rate still be 4.5% you ask? Because the disparity will reduce to traditional competetive levels. Dont forget, even over a year ago, when the base rate was around 5% or above, you could get 2 year fixed rates for 4.75%.

My head hurts! You say to stay on a SVR at 3-3.5% for two years, but I can get a fixed rate of 3.74% for 3 years or a 3.99% for 4 years.
1-0.5% below those fixed rate's isn't worth bothering with. Once the base rate goes up, the fixed rate deals will go up as well. As soon as the first rise happens all mortgage offers will change and increase. Dependent on the rise, those curent variable rates could be the same as my fixed rate within one or two rises or within a year. Even if there isn't a rise this year, I'm still only paying 1-0.5% above most of the current variable/tracker rates currently on offer.

Current top two trackers

Alliance & Leicester 2 Year Base Rate Tracker Max 60% LTV 2.79% for 2 years 4.99% 4.9% Yes* Arrangement 2%

first direct 2.89% Term 75% Arrangement £799 None

Best two fixed.

Chelsea, 3.74%, 3 year fixed.

Woolwich, 3.99%, 4 year fixed.

[Zim Flyer]

Originally Posted by Tubeman

I have an interest only tracker too... Payments have gone down from over £800pm to £46pm in just over a year... It's unbelievable! Just £46 interest on £200k every month... the price of a ticket to The Emirates. For many of us this is a land of milk & honey not a time of hardship... The vast majority of people are net borrowers rather than savers so the interest rates are a boon.

I don't think the pensioners who rely on their savings will agree or anyone who is saving at the moment.

Your boom at the moment will lead to high inflation in the future and withit high interest rates, so enjoy your "land of milk and honey" whilst you can.

Personally I thinik all the savers in the UK should go on strike and take their money out of the banks for a week and then we will see who are the real masters.