Which mortgage deal?

[mnahmnah]

Hi

My current mortgage deal (5.6%, £1323 per month) expires in September. Their current offers for me are attached. Can anyone who knows their stuff advise which would be the best option? I would like to opt for 5 years, but might interest rates go down in 2 years? Also, i don’t have to decide right now, should I wait a month to see if the offers improve?

Thank you!

We are fixing ours for 5 years for several reasons -

1. One set of product fees, else we will have to pay 2 lots of products fees if we renew in 2 years.
2. Certainty
3. Remortgaging is hassle if you are planning baby etc, any changes in circumstances changes your eligibility.

Unfortunately no-one can advise you what future interest rates might do.

They might be lower in 2 years - but they might be higher.

The deals might be better in 1 month's time - but they might be worse.

@WakeMeFriday

My thoughts exactly. I just wondered if anyone wiser in these things may have a better idea!

Very aware of that

Have you shopped around to see how these offers compare to what you could get through remortgaging with a different bank?

Personally I always favoured longer fixes for the reasons outlined by @WakeMeFriday . Given the huge amount of global political instability and wobbly nature of UK finances, I would go for a long fix again.

No expert at all but think about / play around with the term too, eg paying back over 15 / 20 / 25 years as of course less interest paid the less time you have the mortgage.

True. I did wonder about all the instability having an impact. I can’t bear the idea of applying for a new mortgage again though! Very much leaning towards the 5 years

Check if you can lock in now. With natwest I can lock my new deal in and if rates drop before the new deal kicks in, I can switch to a new deal without penalty. So might be worth locking in the 5 year if you can do this

Thanks - it looks like I can do the same. It says I can change as many times as I want, up to 2 weeks before the current deal ends. So that gives me until September 15th.

Those are pretty hefty fees, look at the effect on the APR.

Does your current lender, or another one, offer anything comparable with a lower or no fee?

How close are you to 80% on LTV, based on a realistic value of your property and do you have any savings that could be used to reduce the balance as you'd likely get a better rate if you could get below 80% LTV.

But in any case I'd likely go for the 5 year fix, especially if you can't avoid a fee that size as it wipes out a chunk of any saving you'd make if you could get a lower rate in 2 years.

Also worth bearing in mind that mortgage rates are still slightly below long-term average, the sub 2% rates between 2008 and 2021 were an anomaly.

Still below long term average - that’s the kind of thing I need to hear!

This is the no fee deal. More interest £21 a month more.

So over 5 years the cost of the fee free deal is 60 x 1199.96 = £71997.60

If you took the first 5 year deal, it would be 60 x 1178.62 = 70717.20, so actually cheaper, which is surprising.

@Bjorkdidit Indeed. Interesting. But cheaper both ways, so I think that’s the way to go! Thanks for the figures

you need to consider that all current expectations about what will happen to interest rates in the future are ‘in the price’ and factored into the quotes you have received.

It’s completely up to you with your appetite to risk but another consideration should be that your LTV ratio may improve in 2 years meaning that you can hit 80% deals which may be a better deal. Eg today I can see a 4.2% 5 year deal for 80ltv which is cheaper than the deal you are showing above.

have you considered using a broker? A good one would talk you through all these factors.

personally I don’t think this is a good enough rate for you to lock in for 5 years, I’d do the 2 year deal. That’s me though. It also depends how tight your finances are and so how sensitive you would be to a future rate rise.

I am very risk-averse! But I also don’t want to regret locking in for 5 years. Frustratingly, we’re actually 81% LTV. So close for the better deals.

I have a mortgage payment tomorrow, plus another in August before I have to choose a new deal. Could those two payments bring me to 80% LTV for better deals? Also, the BBC are reporting that August 7th will see an interest rate cut again.

Has your house risen in price? Will they do a new valuation which could affect your LTV?

We bought it 20 months ago and i don’t think the prices have risen here. But no further checks will be done from what I can see anyway.

My point is that you could remortgage again in 2 years for a lower rate with a better LTV.

The mortgage company will usually index link the property based on whichever tool each company use. I have recently asked my mortgage company to provide me with this figure as it’s what they will use to calculate your LTV. If you are able to get this from them it should be able to tell you how close you are from the next LTV bracket for better deals.

@Feelinglucky2025 Thanks. I think I will ring them and talk through it all. I tried yesterday but was on hold too long so gave up.

Definitely give them a ring and see if you can get the 80% deals. If its been 20 months you might find your house value has increased at least a couple of percent. Xx

Personally I always take 5 year deals because I hate the admin and stress of remortgaging and like the certainty of what my mortgage payment would be for the next 5 years to help me budget.

I would love to just switch off thinking about it for 5 years! I found this house move so stressful for many reasons. The mortgage is twice as much as our last house. We have had to do unexpected work to the house and spent a lot of money we couldn’t afford. I have been stressing about this happening the whole time we have lived here! So, yes, I will ring them and hopefully not be on hold. The problem is I can’t ring at work and after work I don’t have the time or the quiet to do it with kids and dinner etc because of when they close! Life eh?!

What would make you feel worse

opting for a 5 year and missing out on some savings if rates do drop

opting for a 2 year and maybe seeing a rise of rates go up

its all about your attitude to risk, there is no right answer