[Closed] Mortgage question: 1.99 Variable, better than 1.64 fixed?

Interest rates can only really go up form their current value (negative rates are very unlikely). So of these two offers 1.64 fixed seems better.

Interest rates can only really go up form their current value (negative rates are very unlikely). So of these two offers 1.64 fixed seems better.

3 years might be better than 2 years though (even with variable rates, the longer the deal, the worse it is in the short term). Also rates could go to zero (making the costs closer)

I'd probably go for the fix, mind

the 3 year variable isnt great, i recently got a 5 year fix at 1.94% no fee, whilst i kept half my mortgage on a tracker 1.75%, bang your details into a comparison site such as money supermarket are the best rates any better.

it all depends on your attitude to risk, how affordable your mortgage is, whether you intend to make overpayments,

the 3 year variable may only be better in year 3 assuming you can't renew your two year fix at a similiar rate,

to me the 2 year fix seems better value

By my dodgy maths, if interest rates hit 0 within 11 months you're doing better out of the variable.

On the basis there are some good deals on 5 year fixed knocking about at the moment I'm expecting renewal will be available at similar rates in two years. Of course all guess work on my part.

Is there a reason you're looking at 2 and 3 year deals? Mortgage brokers try to steer you towards short deals because it gets them more work and more commission. Re-mortgaging costs you money and time - get as long a deal as you can.

The answer to your question is that neither is better. That's why they've set them at those relative levels. The bank will employ some quite intelligent, highly qualified, very well paid people to set those interest rates.

Asking a bunch of bike fettlers which is better value is unlikely to reap benefits.

Actually, this is only slightly true. The real answer, as with many things, is on Joelonsoftware.com. I'll see if I can find the link later

They are both cheap as chips. Enjoy the free money while it lasts.

5 year fixed rate.

Maybe I'm missing something but what does this mean

1) 1.99pc variable over three years?

What happens at the end of the 3 years, surely it's variable or not (do you mean 1.99pc fixed for 3 years or maybe you only have 3 years left to run on your mortgage ?)

> By my dodgy maths, if interest rates hit 0 within 11 months you're doing better out of the variable.

How did you work out that? Current Bank of England base rate is 0.25%, if this drops to 0.0% the variable rate will drop to 1.74% which is still higher than the fixed deal.

The only scenarios where the the variable deal is better:

- negative interest rates - very unlikely.
- If after two years the available rates are much higher than base rate + 1.74% for the remaining one year of the comparison. This is also unlikely and is offset by the money saved in the first two years.

Also worth saying that an increase in interest rates is much more likely than a decrease. Of course no one knows for sure. But looking at the markets it is equivalent to saying the odds on favourite (rates rising) is much more likely to win than the outsider (rates falling).

But all that said - use a comparison site to see if there is even better deals out there.

feed+1

or is it 1.99% above base for 3 years?

Personally I'm risk adverse so I'd go for the longest sensible priced fixed rate I could get for budgeting purposes. Appreciate this doesn't guarantee you the lowest payments but it gives you certainty on your monthly payments.

Other people are quite happy to take a view and go for the cheapest option now and worry about rates going up later. Realistically if rates start to go up they are unlikely to be in huge chunks - more like 25bps at a time and then see how the market reacts.

So both rates are cheap - but personally I'd look at 5 year + fixed rates with my risk appetite.

Assume the 1.99 variable is a tracker rate either to base rate or an internal bank set rate - rather than just the bank's standard variable rate which is likely to be higher.

We're moving at the moment and the new mortgage is a 10 year fixed at 2.64%.

When we bought our flat 12 years ago we started out at 3.99 fixed for 2 years.

Our reckoning is with Brexit there's only one way interest rates are going.

As long fixed as you can I reckon.

Our reckoning is with Brexit there's only one way interest rates are going

Yep static or down as the economy tanks and the government prop things up to stop rioting...

I'd go for a long fixed, we fixed for 5 years at 2.19% as rates could only go one direction....yes, they got cheaper

Bear in mind that the fees apply regardless of why you want to repay your mortgage early. Remortgaging is the obvious one so most assume longer fixed is better. Selling up is also a possibility, as is a change of circumstances. If you lose your job and can't find it again before the insurance runs out the ability to sell without paying thousands in fees is useful. Even if you win the lotto you'd be stuck with a mortgage and property until your term is up or face the fees.

Go for the fixed. Interest rates can't go up at the moment, particularly due to Brexit. The economy would implode.

Take the cheap money and buy a new bike with the savings.

Check the small print of the variable. There might be a clause stating that the variable rate will not drop below a certain rate. A previous variable rate I had included that clause.

How did you work out that? Current Bank of England base rate is 0.25%, if this drops to 0.0% the variable rate will drop to 1.74% which is still higher than the fixed deal

Told you the maths was dodgy! I'd got base at 0.5 in my head

The mortgage companies buy their funds in advance and have a team of treasury experts setting their deals.
Or you could see if a bunch of mountain bikers can beat them at their game.

feed - Member

Maybe I'm missing something but what does this mean

1) 1.99pc variable over three years?

What happens at the end of the 3 years, surely it's variable or not (do you mean 1.99pc fixed for 3 years or maybe you only have 3 years left to run on your mortgage ?)

This normally means that it is a mortgage deal that only has a term of 3 years. Over those 3 years, the % will vary depending on how interest rates vary (i.e. if there is no interest rate change, it will stay at 1.99%, but if interest rates go up 1%, then so will the rate payable, to 2.99%).
At the end of the three years, you get a letter from the mortgage provider saying your mortgage deal is coming to an end, if you do nothing we will swap you onto our standard 'bend over & take it like a man' rate, or you can choose from our other options.

Similar to energy company deals & broadband/phone deals etc.

Thanks everyone. Found every response useful. Ironically it's all moot now 'cos SWMBO just found that Tescos do a 1.5pc rate fixed for 2 years with no setup costs which undercuts the other deals by enough that there's no dielemma.

Interestingly, the comparison sites don't seem the feature the very best deals. (Or maybe I'm not driving them right.)

Is there a reason you're looking at 2 and 3 year deals?

They're just cheaper and I'm (reluctantly) willing to remortgage a lot to save £££s.

The answer to your question is that neither is better. That's why they've set them at those relative levels. The bank will employ some quite intelligent, highly qualified, very well paid people to set those interest rates.

Good point.

Maybe I'm missing something but what does this mean
1) 1.99pc variable over three years?
What happens at the end of the 3 years, surely it's variable or not (do you mean 1.99pc fixed for 3 years or maybe you only have 3 years left to run on your mortgage ?)

After 3 years jump up to the Building Socs SVR. (...but obviously I remortgage at that point so it will never happen.)

Assume the 1.99 variable is a tracker rate either to base rate or an internal bank set rate - rather than just the bank's standard variable rate which is likely to be higher.

This.

You seem to be forgetting that there will be conveyancing fees in there, these are not the same as arrangement fees.

FWIW I'm just moving on to a 75% LTV 10 year fixed at 2.64% (the 60% rate is 2.49%) I expect to have it paid off within eight but have room to spare if I "fall behind".

You seem to be forgetting that there will be conveyancing fees in there, these are not the same as arrangement fees.

I called this morning and specifically asked about survey fees, plus any other fees that might fall on me and they're adamant I'm not paying any fee of any kind.

Same the the 1.64 fix from HSBC - it's called 'fee saver' and they claim no fee whatsoever.

I could have been misinformed, but I'll find that out before I commit.

FWIW I'm just moving on to a 75% LTV 10 year fixed at 2.64%

I'll be the hare for the first year or so but after that you might well be the Tortoise zooming past me. We've both placed our bets 🙂

The mortgage companies buy their funds in advance and have a team of treasury experts setting their deals.
Or you could see if a bunch of mountain bikers can beat them at their game.

He's not asking anyone to beat them.

The mortgage companies buy their funds in advance and have a team of treasury experts setting their deals.
Or you could see if a bunch of mountain bikers can beat them at their game.

And it's not as if a bank / building society has never made a bad bet and lost money....

Same the the 1.64 fix from HSBC - it's called 'fee saver' and they claim no fee whatsoever.

Obviously it'll be down to outstanding balance etc but i find found the fee saver worked out at roughly twice arrangement fee etc more than their fee payable mortgage over a 24 month period (iirc correctly was about £80pcm more vs hsbc's 1.19 over two years +900ish fees)

Obviously it'll be down to outstanding balance etc but i find found the fee saver worked out at roughly twice arrangement fee etc more than their fee payable mortgage over a 24 month period (iirc correctly was about £80pcm more vs hsbc's 1.19 over two years +900ish fees)

For me 'fee saver' is ~£600 less over the two years compared to the full fat version, but thanks for making the point, I could easily have overlooked it.

He's not asking anyone to beat them.

Indeed, and I thought I'd covered this with "I appreciate this is a bit like asking what interest rates will do in the future which is unanswerable, but I value STW's collective opinion.". Asking a bunch of mountain bikers is *never* wrong.

Interestingly, the comparison sites don't seem the feature the very best deals. (Or maybe I'm not driving them right.)

I'm guessing that's because the best deals are direct only and they won't pay a commission to the price comparison sites (so they don't feature them)

I'm going to a fee saver as well, I still have to pay a solicitor for conveyancing work (transfer of deeds to new lender).

I saw 1.85 fixed for the life of the mortgage recently. tempted.

I've just taken a 5 year fixed on 1.74 with Barclays, there was a £1k fee, but given the shit storm we're about to go through with Brexit I figured it's best to lock us in for the duration. The next no fee product worked out about 1.85, so I probably save about £250 over 5 years using the product with the fee.

I'm going to a fee saver as well, I still have to pay a solicitor for conveyancing work (transfer of deeds to new lender).

Unlucky. Tesco have won the beauty contest for my business and I've called their helpline numerous times to clarify everything I was suspicious about: They deffo appoint a solicitor on the customers behalf and pay for it. There are literally no fees or costs. Or if there are I haven't found them yet.

EDIT: Just checked Tescos website:

Remortgage

If you're remortgaging with us we'll meet the standard legal costs. We work with LMS, who specialise in managing law firms for conveyancing transactions. We will pass them your details and they will be in touch shortly.

http://www.tescobank.com/mortgages/fees-and-charges/

I saw 1.85 fixed for the life of the mortgage recently. tempted.

Where was this? Tempted, yes please!

I saw 1.85 fixed for the life of the mortgage recently. tempted

I don't believe you can have that right - far too low. Lifetime Baserate tracker at BankofEngland rate +1.85% maybe (and that would be a very good deal).

It was on a comparison site. I'll dig it out later.

The longer you can fix for, the better. Inflationary pressures mean that interest rates are eventually going to have to go up. Fixing for two years could put you in a tricky position when you come to the end of that period as it will turf you out into the eye of the Brexit storm.

Wrecker? Found it yet?

[quote=martinhutch ]The longer you can fix for, the better. Inflationary pressures mean that interest rates are eventually going to have to go up.

http://www.bbc.co.uk/news/business-40288125

The longer you can fix for, the better.

You can get insurances against some of those risks.

Back in 2006 I took up the offer from the Abbey for a 0.49% tracker above the base rate for the life of the mortgage. Now it's with Santander but still one of the best punts I have taken. 🙂

Obviously, Abbey was still making money on it or they wouldn't have offered it.

In contrast we took out a 5.78% 5 year fixed term just before the crash in 2008. 😯