Mortgages - am I missing something?

[cortisolqueen]

Been sent an "invitation" to renew our mortgage deal today.

It says the variable rate is 5.87% but the fixed rates it's offering are 5%. I am lucky to have quite a small mortgage of just under £50k at the moment, so that difference won't make much difference to monthly payments.

It sounds like I'm best to stick to the variable rate at first - would you agree? I'm also planning on paying off £15k from savings and I think I won't be penalised with an early repayment charge if I stick to the variable rate for a short while at least.

You don’t need to accept either - you’d probably find a better deal if you shopped around.

Whether fixed or adorable is better depends on lots of things - how quickly you intend to pay it off, how stable your income is, the % of your income this represents, and of course a view (guess!) on what interest rates will do next.

You're right. Most fixed rate deals will allow you to repay 10% a year so it certainly looks as though you are better off with a flexible mortgage

I'd love an adorable interest rate.☺️

Yes I agree as your mortgage is so small. Plus if rates drop you can fix then. Rates might go up of course but it sounds like it’s worth the gamble

5% isn’t great right now - rates have come down a bit.

I wouldn’t stick with the SVR though, that’s madness. Get a tracker instead.

So yes, you are absolutely missing something: the fact that tracker mortgages are an option!

Thanks all - I'm hoping to reduce my mortgage to under £30k, then reduce the term to pay it off quicker (hopefully under 2 years). My income is fixed, but I occasionally get bonuses, so it may be worth waiting to see if I can pay any more lump sums off before I fix.

Look on a mortgage comparison website like London and Country to see what is out there. It will search the whole market and you may find a great deal out there for yourself.

A lot of mortgage comparison sites are hopelessly out of date right now, just FYI.

@HedgehogOBrian London and Country are recommended by Martin Lewis as they are free and whole of the market plus broker only deals. It is a good starting point. Money Saving Expert updated their mortgage page 4 days ago, L&C is still their top recommended site for mortgage comparisons. So whilst I appreciate others may be out of date, L&C are possibly the best place to start.

Money Saving Expert Mortgages

MSE wasn't any good for me once I'd reduced my loan to less than £30k, it came back with 0 options!

I've never had a tracker before, do they cap the rate payments can increase by?

You can probably get a fix at a lower rate for £50k and put the £15k into a higher rate savings account

Usually though sticking with the same company = no fee and moving = fee, so with such a small mortgage staying might be better as a fee of say £1000 is quite a large percentage of the mortgage

Banks announced today that even if interest rates go up they are going to reduce mortgage rates over the next few months as the market picks up.

So I'd wait and pay off lump sums if possible

If you pick a mortgage with no overpayment penalties (and in your case a low fee or no fee) you can take a 50k mortgage and repay it in any way you like! It's easier to get a mortgage above a certain value as a lot of banks don't seem to bother with 20-30k mortgages. First direct have no limit on repayments (though you can't pay the mortgage off completely I think) and I've also heard trackers are flexible.