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Original poster

Mortgage - what would you do

26 replies

popsickle555 · 19/04/2023 21:35

We are on a 2 year tracker/variable mortgage which has increased from £1200 a month to £1710 due to interest rates (currently we are on 5.34%). I engaged an advisor (no fee) who has found us the following:

swap now (6 months early) to:

2 year fixed at 4.19 with a £999 fee
3 year fixed at 4.14 with a £999 fee
5 year fixed at 3.99 no fee

all of them are portable if we want to move (which we may but not for 2-3 years I don’t think). Wouldn’t be a hugely bigger / more expensive house just a change of location.

I don’t know what to do. Is fixing at 3.99 stupid at this point or a wise move given rates are likely to fall? It would reduce our payments by £200 a month if we do that. Advisor also said we could extend the term. We have 21 years left on a 260k mortgage but quite a lot of equity as the house is worth 675k ish. We are both 40.

i know nobody has a crystal ball… but i am interested to hear what others are doing in a similar situation?

OP posts:
BeastOfBODMAS · 19/04/2023 21:57

I would take the 5 year and put the amount you save each month into a savings account paying more than the mortgage interest rate. Then if rates drop so dramatically within 5 years that it’s worth buying yourself out of the deal, you have a pot to do it with, you literally cannot lose.

OnlyFoolsnMothers · 19/04/2023 21:59

I’d take the 5year

OhSmitty · 19/04/2023 22:02

I'd go longer term too. I personally don't expect much of an interest rate drop over the next 5 years so 3.99 is a good rate based on today's rates.

blueshoes · 19/04/2023 22:04

BeastOfBODMAS · 19/04/2023 21:57

I would take the 5 year and put the amount you save each month into a savings account paying more than the mortgage interest rate. Then if rates drop so dramatically within 5 years that it’s worth buying yourself out of the deal, you have a pot to do it with, you literally cannot lose.

The thing to watch out for with this is that fixed rate mortgages tend to have an early redemption fee which will eat massively into any interest savings from trying to get out early. Check what the early redemption fee is before committing.

Tracker mortgages tend to be freely redeemable. Fixed rate mortgages may only allow 10% overpayment a year.

If you have the ability to get big lump sums e.g. bonuses, then if interest rates move dramatically, you can use it to overpay of the mortgage to pay down the capital.

distrussful · 19/04/2023 22:05

It's worth reading up on the IMF view re rates in the UK, France and Germany over the next decade. In summary they believe we'll go back to pre Covid rates. And, if you think about the fact that the bank is offering you the best rate there over 5 years, having priced in their own viewpoint, one would be inclined to think they agree. Not advice, simply worth reading through the wider issues of productivity and an aging population, both of which will have a far longer reach than current inflation.

Original poster
popsickle555 · 19/04/2023 22:07

Good tips here thank you!

OP posts:
blueshoes · 19/04/2023 22:12

Did you only get quotes for fixed rate mortgages? What about getting a cheaper tracker?

BeastOfBODMAS · 19/04/2023 22:33

@blueshoes agree entirely but would also add if you’re remortgaging every 2 years at a £1k fee each time trying to hedge against a possible rate drop, that can easily cost more than the ERC you might want to pay in a very limited set of circumstances during longer term fixes.

blueshoes · 19/04/2023 22:53

BeastOfBODMAS · 19/04/2023 22:33

@blueshoes agree entirely but would also add if you’re remortgaging every 2 years at a £1k fee each time trying to hedge against a possible rate drop, that can easily cost more than the ERC you might want to pay in a very limited set of circumstances during longer term fixes.

Good point. I always factor in the arrangement fee and the frequency of remortgaging into the cost of the mortgage. This makes the 3.99% 5y fix more attractive because the roughly 2K+ savings on the arrangement fees over 5 years will give a buffer against a steep fall in rates.

I know mn conventional wisdom is to fix. But when I have gone for the 2-3 year tracker, I have come out quids in. That said, that is a different interest rate environment and dh and I have stable jobs so made sense to take a risk. In this case, I am inclined to go for the 3.99% 5 y fix but worth OP crunching the numbers first.

determinedtomakethiswork · 19/04/2023 22:59

Do you mind my asking for the 3.99 one is with?

BumWad · 19/04/2023 23:37

Nationwide have a 3.99% 5 year fix at the moment determined

LucifersLight · 20/04/2023 00:56

I reckon rates will be higher in a years time than they are now to be honest, they’re always fast to put them up and slow to bring them down. 3.99% is still low historically.

KievLoverTwo · 20/04/2023 03:28

popsickle555 · 19/04/2023 21:35

We are on a 2 year tracker/variable mortgage which has increased from £1200 a month to £1710 due to interest rates (currently we are on 5.34%). I engaged an advisor (no fee) who has found us the following:

swap now (6 months early) to:

2 year fixed at 4.19 with a £999 fee
3 year fixed at 4.14 with a £999 fee
5 year fixed at 3.99 no fee

all of them are portable if we want to move (which we may but not for 2-3 years I don’t think). Wouldn’t be a hugely bigger / more expensive house just a change of location.

I don’t know what to do. Is fixing at 3.99 stupid at this point or a wise move given rates are likely to fall? It would reduce our payments by £200 a month if we do that. Advisor also said we could extend the term. We have 21 years left on a 260k mortgage but quite a lot of equity as the house is worth 675k ish. We are both 40.

i know nobody has a crystal ball… but i am interested to hear what others are doing in a similar situation?

Up until last week, the consistently highest rates from 2, 3 and 5 that I was being quoted by 4 brokers was 3. That told me the lenders are expecting rates to fall in 3.

But your 2 and 3 are the wrong way round to support that.

I would go for 3 but there are many useful suggestions on this post.

Robin233 · 20/04/2023 07:11

5 year fix definitely
I lived through the 15% interest times.
We did a 5 year fix in January
Hopefully will be able to pay the mortgage off at the end of that.

moonspiral · 20/04/2023 07:13

3 year fix

justanotherdrama · 20/04/2023 07:17

BeastOfBODMAS · 19/04/2023 21:57

I would take the 5 year and put the amount you save each month into a savings account paying more than the mortgage interest rate. Then if rates drop so dramatically within 5 years that it’s worth buying yourself out of the deal, you have a pot to do it with, you literally cannot lose.

This is brilliant advice is so this if I was you

Avidreader12 · 20/04/2023 07:39

I would telephone or contact L&C online to see if they can offer better deal they are whole market broker available 7 days a week. No commission A quick 5 min search showed they are quite a few deals that would beat those you posted..https://www.landc.co.uk/

L&C | The UK's Largest Fee-Free Mortgage Broker and Advisor

Fee Free Mortgage Advice from the UK’s Best Mortgage Broker. Our award-winning service is available online or by phone 7 days a week. Get started today.

https://www.landc.co.uk/

thesugarbumfairy · 21/04/2023 11:51

I took a 5 year fix which starts May. Its 3.99% too (went with HSBC via the mortgage store - this was in Feb and there was a 1k fee)
I am shit with finance matters but it felt like the 'right' one to go with. I won't actually notice in 3 years if the interest rates drop I expect. I detest the whole process and am glad to leave it that long.

alwaysmovingforwards · 24/04/2023 12:40

OhSmitty · 19/04/2023 22:02

I'd go longer term too. I personally don't expect much of an interest rate drop over the next 5 years so 3.99 is a good rate based on today's rates.

Yup.
I'm about to secure 3.99% for 5 years.
It's a hike from my current 1.64%... but we ain't going back to those rates within the next 5 years. People need to remember that the rates for the last decade have been 'very low' as a stimulus following the crash, not 'normal' as some seem to think.

GrassWillBeGreener · 25/04/2023 21:16

I'd also have a think about where you and your lives will be in 5 years time.
We fixed at 2.39% 5 years ago (ending in a few months). Given how low interest rates ended up dropping I occasionally thought "if only", but actually, our youngest is about to finish school and a few other things in our lives are changing now too. For us, a 5 year fix back then made sense to give us certainty, and now it's finishing we can think more flexibly about "what next?"

BumWad · 26/04/2023 15:01

We have had the same conundrum OP.

We have opted for a 5 year fix at 3.92% no fee yesterday through L&C.

Bluffysummers · 27/06/2023 08:47

OhSmitty · 19/04/2023 22:02

I'd go longer term too. I personally don't expect much of an interest rate drop over the next 5 years so 3.99 is a good rate based on today's rates.

I would if it was 3.99 it’s actually 5.5%

Bluffysummers · 27/06/2023 08:49

BumWad · 26/04/2023 15:01

We have had the same conundrum OP.

We have opted for a 5 year fix at 3.92% no fee yesterday through L&C.

How are you getting that rate? Did you secure the rate months ago? I spoke to L&C yesterday and the best they had for 2 years was 5.93

thesugarbumfairy · 27/06/2023 10:23

@Bluffysummers you're commenting on post that are 2 months old.

Unfortunately the rates have jumped up again in that short time. If you look on the mortgage calculator from L and C you can get a good guide (without speaking to them again!) https://www.landc.co.uk/best-mortgage-rates/

No you aren't going to get less than 4% at the moment. Not even for a long term fixed.

Bluffysummers · 27/06/2023 10:26

thesugarbumfairy · 27/06/2023 10:23

@Bluffysummers you're commenting on post that are 2 months old.

Unfortunately the rates have jumped up again in that short time. If you look on the mortgage calculator from L and C you can get a good guide (without speaking to them again!) https://www.landc.co.uk/best-mortgage-rates/

No you aren't going to get less than 4% at the moment. Not even for a long term fixed.

Oh I’m a dummy aren’t i? I thought it was my own thread and by some wizardry people had some secrets to getting some rates below BR…

learn to read Bluffy