Looking at changing my mortgage. It is a fairly simple deal as I have sufficient equity and can cover repayments etc.
Just looking on the comparison websites and ING Direct seem to competitive offering both a tracker and a discounted rate. The rates are pretty much equal and the special offers last the same period but there is a £945 charge for the tracker one.
Any reason not to go with the discount mortgage or any reason to go with the tracker?
Any other advice?
I'm not a financial adviser and professional advice would be sensible!
Tracker is fixed to BOE base rate (I assume).
Discounted is AFAIK linked to the banks own Standard Variable Rate (SVR).
Whilst usually SVR follows BOE base it may not. ING will be free to change that as they see fit, whenever they wish.
Base rate is going to go up at somepoint. The SVR will probably follow it. But if Base comes back down for any reason, I've noticed banks are usually a lot slower to put their SVR down!
I've not surveyed the market recently but are there any sensible capped/fixed rates available? Whilst it seems unlikely that we will see a huge jump in rates in the next couple of years (it seemed equally as unlikely that we would be this low four years ago!) - they can only go in one direction. It is a question of when not if rates go up. It is then a question of how much the increase is.
The two questions I would be asking are:
- what do I think interest rates might be in 3 years time? (I'd stab a guess at BOE base being 2.5% - but also budget on 3.5%)
- if base is at that level what mortgage options might be available then (and it the trend is up, capped/fixed deals will be even less appealing).
Paying slightly more for a long term (say 10 yr) fixed rate might actually work out cheaper than changing every 2-3 years with a £1000 fee each time... ...of course you need to keep your eyes open for redemption clauses if your circumstances change.
Just going through this now and went for the HSBC tracker which is fee-free. It was ending soon though and not sure if it is still available?
if you have savings have a look at offset
I'm with gusamc - the interest you can earn on your savings is pitiful just now, going offset makes alot of sense.
"Just going through this now and went for the HSBC tracker which is fee-free. It was ending soon though and not sure if it is still available?"
Thats what we have just gone for too.
Using comparison sites doesnt come up with all the deals as some lenders dont go on such sites.
Fixed rates are silly money at the moment with £2k fees not unusual.
IFA's are not what they used to be apparently the days have gone when they used to get preferential rates that the public couldnt get. (So a now ex IFA friend has told me)
Also in terms of rates rising, the above IFA and another IFA we now use both kind of hinted that they didnt think rates would change that dramatically in the next 5 years, ok there is only one way they can go, but mortgage fees tend to have more impact that small rate rised would... unless you have a huge mortgage!
...both kind of hinted that they didnt think rates would change that dramatically...
That's a bold statement. I wonder what facts they based that on? Did they say your house can only go up in value, too?
I'm with gusamc - the interest you can earn on your savings is pitiful just now, going offset makes alot of sense.
Interesting, the HSBC quote looks quite good.
If I was to reduce my term to 20 years from 23 and borrow an extra £25K to do up the kitchen, my repayments will go from £790 to £844 (2 year fixed, without booking charge)
That seems a pretty good deal!
but mortgage fees tend to have more impact that small rate rised would... unless you have a huge mortgage!
Assuming a 200k mortgage (which I'd guess is probably not unrealistic on here) then a 1% difference in interest rate = £2000 in interest per annum (I know I am simplifying things because you pay it back and the capital - interest changes). So a £2000 saving on fee for a short term cheaper (non fixed) rate is a gamble that you won't get stung down the line. The real issue is not which is cheaper in the next three to four years - its what can you afford in the years 5-8... if rates have gone up you'll be stuck with that.
.
I like fixed rate as it's easier to budget for. I have a spreadsheet with my next 3 years expenditure on it!
I compared against a 2 year fixed with booking fee and this still works out cheaper by the tune of £250 over the 2 years. I've not looked at a discounted.
We already have a fair amount of disposable income (1 salary worth) so we can handle a doubling of a mortgage if necessary.
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