FTB mortgage shock

[LottaOtta]

I’m a first time buyer and basically going in blind. I saw a mortgage advisor (reputable in my area) who advised me to go for a 2 year fixed rate over a 5 year fixed rate, saying that 5 years are really only ideal for people who have close to no wiggle room each month re budget. I understood that after the fixed rate period my payments would change but I didn’t quite realise they would change THIS much.

I received my mortgage offer yesterday from Halifax and was surprised to see this. Is this a typical jump after the end of a 2 year fixed rate? I’m also confused by them seemingly setting in stone what they’ll be raising my repayments by, surely that depends on the base rates in 2025 (like they say in bold at the bottom)?

if I knew it was going to be a £160 monthly increase after the fixed rate ended, I’d have insisted on a 5 year rate (my fault for assuming the mortgage rate would change SOMEWHAT but not asking how much that might be).

is it possible (or reasonable) to ask my mortgage advisor to reapply for a 5 year fixed rate instead? Will that dent my credit score?

thanks

We always fixed for as long as we could because we liked the predictability of knowing what our payments would be - but - for us part of that was that our mortgage payments were very low anyway as we had a lot of equity in the house and we weren’t worried about trying to pay it off early (we knew we had a lump sum coming within a few years). So it really is a case of everyone’s circumstances being different. You really have to do your research and do what’s right for you.

It's not random. It's based on the current standard variable rate. Which is the only estimate the bank can give without knowing what the rate will be exactly in 2 years time. It could be higher or it could be lower. That's why they give the caveat in bold.

Typically, when you take out a repayment mortgage, you'll pay a set rate for a fixed term and as your "deal" is coming to an end you'll look to fix again on a new one, either with your current lender or by remortgaging with a different lender.

OP you also need to make sure you understand other aspects of your mortgage like early repayment charges and porting.

I'm another with a base rate tracker. My fear was that rates would jump up and I would struggle to cope with a big payment rise.

I didn’t quite realise they (payments) would change THIS much.

For at least the last couple of years, older posters on MN have warned over and over again that mortgage rates can rise to crippling and beyond... and have , in the past.

We've known mortgage interest rates at 15 %.

If we were buying now, we'd go for a 2 year fixed. We have owned our current place for 7 years and in that time remortgaged twice. It is perfectly normal to change products to try and get a better deal. Whether you can get a better deal will depend on what interest rates are doing.

@LottaOtta

yes, as @cloudyskye says, you need to also understand 'ERC' & porting.

ERC (Early Repayment Charge) is when you pay back your mortgage early (which you might need to do if you want to sell or move to a different 'deal'. It can be very expensive. Your mortgage 'deal' will set it out clearly, usually in percentages. Decreasing each year.

'porting' is keeping your existing deal on the balance outstanding on your mortgage on a 'new' (to you) house when you move BUT although the 'deal' is guaranteed, you still have to reapply for your entire mortgage. The extra you're likely to need will be at whatever the rate is when you do it.

I usually fix for 2 years so I'm not caught up in the ERC BUT this time (Sep 22) I've fixed for 5 because of the rising rates & I wanted to know my mtge wasn't going to increase for 5 years.

each person & their situation is really very different, so you do really need to find out what Halifax offers & the relevant charges & restrictions before signing up to it.

Another thing that's confuses some people is that your Lender IS lending you the money for the length of the mortgage. It's not really 'remortgaging' at the end of your 'fix' it's just renegotiating the terms of the loan (mortgage). At worst it'll go onto the SVR.

You need to find out what the NO PENALTY over payment limit is per year. I think most lenders its 10% if the original mortgage amount, but you need to check specifically on the 'deal' you're being offered.

If you're paying the mortgage broker, then they will encourage you into a 2yr mortgage fix, then there's another fee in 2yrs.

Ask us anything you're confused about. There IS a lot of information online, but it can still all be very confusing.

make yourself a list of things to check in the mortgage offer!

And £160 isn't a lot. At the end of our last fixed we went onto a tracker because we intended to sell and didn't want to have to pay an early repayment fee. We didn't end up selling and our payments increased by about £400 a month in the space of 5 months. We ended up fixing for 2 years.

Surely the very definition of a tracker is that as rates go up so does your mortgage? Or am I missing something? Obviously the reverse is true, but we’re unlike to see rates as low as we have over the last 10 years or more for a very long time, and they’re like to go up further before coming down. 5 year fixes give you a pretty good idea of what banks think rates will do…

Choosing your fixed term is just a gamble. No one really knows what is going to happen, just look at a slight change by politicians recently that had a significant change.

I change my mortgage every couple of years, depending on who’s offering the best deal.

OP the fixed rate time is just the period of time you’re stuck with that lender, and you’d pay a penalty if you left them before that period expires. After that you can do what you like. If you win the lottery you can pay it all off. If you find a better lender you can borrow from them and pay off your original lender.

Be aware that you can organise your next remortgage rate from six months ahead of the date this term will end, and so you can 'fix' a rate six months ahead. You can change to a better rate during that six months, if one becomes available say when the interest rates change, or you can stick with the one you 'fixed' at. We're doing that now, watching the interest rates.

In these uncertain times I would go for the 5 year fixed rate.

If you young a lot can change in two years, married , divorced, kids , job change .

.
Maybe you do not want to be tied for 5 years
Are you buying one bed two bed 3 bed? On your own ? In area linked to job or family ? Might you move in future?

I was a FTB last year. I took out a 10 year fixed rate

You can look at it this way , if we all knew what was going to happen with mortgages, interest rates and house prices we would all be rich . If you want a gamble go for 2 years , if you would rather know your budget and outgoing for 5 years and ignore what’s going on in the market go that way . There is no right answer as it depends on your circumstances .

I was always advised to take the longest term the building society would offer. They're not going to offer a fixed rate for any longer than they think they can charge you more are they?

were buying now and getting 5 year fix. For us it’s reassuring to know that’s the payment for 5 years. But we had a 3 year fixed before and we then went onto the standard variable rate as we were selling. But wouldn’t recommend that unless you’re moving
instead of remortgaging, you can usually do a product transfer onto another fixed rate if you stay with the same bank. It’s much easier than remortgaging, assuming your bank has a good rate at that point

Well, yes, taking a 10 year at 2-3% was fairly obvious.

A 10 year at 4-5%?

Hi, Can you please advise under what name was hard search on your credit file when you applied for Halifax mortgage. I applied for Halifax mortgage yesterday and there is hard search yesterday in name of Bank of Scotland. Hence wondering if this was Halifax hard search. I will really appreciate your help.

Or they could be higher.

@Asian its always better to start your own thread rather than piggybacking another as lots of people won’t see your question and will respond to the OP. However, a quick google will tell you that Halifax is a division of Bank of Scotland d so yes it’s quite likely that it’s your mortgage search, unless you’ve been applying for other credit at the same time.

OP after 18 months you can start to apply for a new fix to start after the 2 years runs out. You don't leave it until the 2 years runs out then start looking. A mortgage offer lasts for 6 months.

Apologies, already created another one on this.