Mortgage advice

[Soulja]

Hi all,

I'm looking at buying my first property and I'm wondering what type of mortgage would be best to go for? The low rate or variable mortgages look good at the minute or should I play safe and go for a fixed rate? If the variable rate went up by 1.5 percent or so it wouldn't affect me too much, but what's the chance of it increasing more than that?

Thanks.

 

[cainer]

http://forums.overclockers.co.uk/forumdisplay.php?f=151

 

[Zefan]

Lenders are stress testing the affordability of applicants based on a possible rise to 6.99% - Barclays is anyway.

 

[Semple]

Looking to get on the property ladder myself in the next 12-24 months. I must admit i would prefer to play a safe bet, even if it may cost a little extra. So my thinking would be long term fixed rate. You at least know what your outgoings will be over the next 5 or so years. I think the BOE are primed to increase their interest rates very soon - as they've been at a very low rate for years. They had promised to increase as the rate of unemployment fell to a certain level, which was passed but the rates weren't raised. It's only a matter of time now.

 

[xs2man]

It depends on how long you fix the term for.

Mark Carnie said the other week that he expects rates to start rising by the end of the year. But he does expect them to rise slowly. So probably 0.25% at a time. He wont raise them too quickly either so you may be looking at around 4-5 months between rises, depending on how the economy performs after each rise. So it may well take a few years to get up to a 1.5% rise.

I fixed my rate for 2 years just before these rise possibilities were announced. It might have been a better idea to fix them for 5 years in hindsight, but then the longer you fix it, the higher the rate you pay. And then the more you pay (as you get further into your mortgage), the more equity you have, and generally speaking, the more your house is worth, meaning you can jump LTV bands to reduce the rate you pay. So my thinking was that in 2 years I could jump another LTV band and then fix for longer then.

It's always a gamble though. No-one knows what is best to do. Anything can happen with the economy really. We are currently looking quite strong, and may well continue to grow steadily, and the interest rates could rise steadily as a result. But being so close / reliant on the Eurozone, and it's problems with Greece (and shortly after other countries) could easily hold our economy back, and keep the rates lower.

I think over a 2-3 year term the rates are unlikely to increase by over 1.5%, although I suspect the will likely increase by that amount, but anything could happen.

 

[Miguél]

There are a few point to consider for yourself

What will your LTV be? 95%, 90% or 85% etc..

The lower it is the more I would say fix for 5 years if possible.

90 or above either fix for 2 or go on a tracker.

We fixed for 2 years last year at 90% LTV and have overpaid enough to be under the 85% threshold when our deal comes to an end. This means there are better rates available for us to choose from and I will likely look to fix for either 5 or 10 years next July. If the rates go up as suggested.

 

[Soulja]

Thanks for the replies guys. They are very helpful. I should have a 20% deposit. I've found a 5 year fixed term with the rate at 3.09%. It seems to be round about the best one I can find.

 

[kitkat9933]

I'm on a mortgage at 38% ltv. I choose a 2.45% fixed for 5 years for several reasons. Firstly, the difference between 1.7 and 2.45 is minimal on the amount I've borrowed (in the grand scheme of things), also it had no upfront fees except a £200 admin fee and survey fee. The 1.7% might look good on the outset but after £1200 in fees, it was actually more expensive over the term of the mortgage. Also I get 5 years with fixed outgoings. I look at 10 years but the rates were just too far distant compared to 5.

Win Win. You really need to put ALL the numbers in a calculator to see what's best for your situation. Also at the moment I would pay a tiny bit more to lock it in over a good few years.

 

[Jokester]

Lenders are stress testing the affordability of applicants based on a possible rise to 6.99% - Barclays is anyway.

I couldn't believe the "interrogation" I got when I remortgaged to Santander. Wanted to know everything even how much money I had in investments, how easy it was to access. Apparently new rules came in start of the year I think.

They reckon 40% of current mortgage holders won't be able to remortgage as they'll fail the stress test.

Last time I got a mortgage, it was pretty much how much did I want and they gave it to me, and that was still post credit crunch!

 

[Haggisman]

They reckon 40% of current mortgage holders won't be able to remortgage as they'll fail the stress test.

Out of curiosity, what will be the outcome for those 40%? (as I may end up falling into that category =/)

Will they be stuck on the hideous "standard" rate mortgage that you default to when your deal ends, or will it be "bye bye house"? I'm guessing/hoping the former?

 

[HungryHippos]

Out of curiosity, what will be the outcome for those 40%? (as I may end up falling into that category =/)

Will they be stuck on the hideous "standard" rate mortgage that you default to when your deal ends, or will it be "bye bye house"? I'm guessing/hoping the former?

Will revert to SVR, for me this is about 4% on my deal.

I should be able to remortgage though without an issue.

 

[zom247]

With the recent talk about interest rate rises we're thinking about remortgaging. Currently with Nationwide on their SVR (2.5% I think) and perhaps looking to fix for 10 years. We overpay our mortgage every month and our LTV is about 63%. Is it worth fixing for this long? I can't see rates staying this low for ever or should we just stick on the SVR for a bit longer?

Also, who do people talk to for their mortage advice? An IFA or their banks? Been 8 years since we took our mortgage out so a bit rusty!

 

[HungryHippos]

Well, to be honest you could probably get a better rate on a fix than on that SVR, but that SVR is better than the deal you would wind up on after your fixed term ends. My SVR defaults back to 4% for example.

I assume your SVR will track interest rate increases too.

I wouldn't fix for 2 years now, we've had a lot of years of 0.5%, whilst I don't think interest rates will skyrocket anytime soon, they can't stay 0.5% forever, and you could wind up paying more to remortgage later on.

I would probably fix for 5 years or 10 years now, compare the two rates. You are betting into the future a little bit in terms of where interest rates are heading, but the truth is they can't really go down, only up, so the unknown is up by how much. Also 10 year fix costs more yes, but it also gives you 100% certainty on costs for 10 years.

Was going to look at fixing myself in October sort of time, I am currently on a tracker deal at 1.09% above base rate, so I'd like to fix for probably 5 years before they start boosting rates up on new mortgage deals.

I went direct to Nationwide last time, you can go to IFA's etc, but Nationwide were competitive, it was easy to sort out, and I didn't have to pay any fees at all! (the ones with fees attached aren't usually worth it anyway).

 

[#Chri5#]

Also, who do people talk to for their mortage advice? An IFA or their banks? Been 8 years since we took our mortgage out so a bit rusty!

You can do some leg work yourself.

MSE has a pretty good comparison tool here

Some mortgage providers only work through IFAs, so possibly worth finding one and speaking to them once you've had a search. The opposite also exists - some banks will only deal direct with borrowers (First Direct comes to mind)

 

[OracIe]

Out of curiosity, what will be the outcome for those 40%? (as I may end up falling into that category =/)

Will they be stuck on the hideous "standard" rate mortgage that you default to when your deal ends, or will it be "bye bye house"? I'm guessing/hoping the former?

From what I've read, if you stay with your existing lender, and have made payments OK for the entire duration of the mortgage at that point, you can simply choose a new product from that lender (Assuming you meet the LTV ratio of the product you're choosing) but if you were to switch lender, you'd need to go through all the affordability checks.

We bought our house in 2010 on a 5 year fixed - I can choose new product in another month (3 months early) so I'll report back on the process if you want?

I'm looking at going fixed again for the next 5 years and saving myself a couple of hundred pounds a month.

 

[Haggisman]

From what I've read, if you stay with your existing lender, and have made payments OK for the entire duration of the mortgage at that point, you can simply choose a new product from that lender (Assuming you meet the LTV ratio of the product you're choosing) but if you were to switch lender, you'd need to go through all the affordability checks.

We bought our house in 2010 on a 5 year fixed - I can choose new product in another month (3 months early) so I'll report back on the process if you want?

I'm looking at going fixed again for the next 5 years and saving myself a couple of hundred pounds a month.

I'm only half way through a 5 year fix, so it's still a good way to go and it'll probably have all changed again by then!

My credit history /should/ be all good by then anyway, so hopefully nothing to worry about - as I said, was more out of curiousity anyway )

 

[GinG]

I'm only half way through a 5 year fix, so it's still a good way to go and it'll probably have all changed again by then!

My credit history /should/ be all good by then anyway, so hopefully nothing to worry about - as I said, was more out of curiousity anyway )

Before we moved house we had to remortgage on our last house, stayed with Nationwide and they just switched products no checks or anything. Got £100 or so cashback which was nice!

 

[Jokester]

It's not just credit history you should be worried about, the stress test will check whether you can cope with a large increase in interest rates and also whether you could survive losing work for a period of time.

Even staying with lenders they are supposed to stress test you at the moment, but they are trying to change the rules to relax this part.

 

[Wizardskills]

Thanks for the replies guys. They are very helpful. I should have a 20% deposit. I've found a 5 year fixed term with the rate at 3.09%. It seems to be round about the best one I can find.

Barclays are doing a 5 year fixed for 2.99% or a 10 year fixed for 3.25% both with a 20% deposit.

My thread here may help you work out how much you can afford.

 

[Deleted member 66701]

Out of curiosity, what will be the outcome for those 40%? (as I may end up falling into that category =/)

Will they be stuck on the hideous "standard" rate mortgage that you default to when your deal ends, or will it be "bye bye house"? I'm guessing/hoping the former?

You can "re-mortgage" with your current provider but you might not be able to move to another provider or get a bigger mortage to move house.

Edit:-

What OracIe said