End of 'Fixed-rate' mortgage term, what to do?

[TheBoyBilly]

I will end a 5-year fixed rate term in December leaving under 3 years to go before I settle. I have been offered another 2-year deal where I wil pay back £230 per month. If I do nothing (and automatically go onto the Standard Variable rate) I will save around an extra £60 (pay back £170ish) per month. Is it worth gambling on rates not going up that much in 24 months. I think rates will stay low for a while yet, what do you think? By my calculations, at the moment 'doing nothing' will save me an extra £1400 over two years.

Bill

 

[Pottsy]

I agree, do nothing. Even if you get through 12 months before a rise, the rise will be small and you'll be no worse off.

All just an opinion of course.

Edit: You lucky git only having 3 years left on your mortgage.

 

[accountantpete]

As they say - anyone who tells you which way the market will go is a liar.

For what it is worth, with all the major Western economies in trouble the only way you are going to see a rate rise in the short term is through inflation taking off and governments having to raise rates to counter this.

The logical move based on what you know now is to take the variable rate.

All this is based on known knowns and known unknowns so there are only the unknown unknowns to worry about.

 

[Beebo]

Your total mortage liability is less than £8,500!!!

I pay that every 6 months, and have 20 years left!!

I took out a 5 year fixed rate last year, because I though the rates will only go up. But it seems that the government is intent on inflating away debt and keeping the rates artificially low.

Your mortage is so small that you cant realy go wrong either way, take the variable rate whilst rates are low. What's the worst that can happen.

 

[TheBoyBilly]

Thanks all, I had agreed to take the new Fixed Rate deal 'over the phone' and the paperwork arrived this morning. I think I will give the bank a ring to say I have considered my options and will just let things ride for the remainder of my (less than) three years commitment. It will be nice when it's all paid off I must admit.

Thanks again,

Bill

 

[jonny jeez]

Thanks all, I had agreed to take the new Fixed Rate deal 'over the phone' and the paperwork arrived this morning. I think I will give the bank a ring to say I have considered my options and will just let things ride for the remainder of my (less than) three years commitment. It will be nice when it's all paid off I must admit.

Thanks again,

Bill

Are you sure you will automatically revert to the standard variable. 5 years ago BS's were fixing rates that "tied you" in to a deal that offered a discounted variable at the end of term (like mine). I guess their logic was that they'll loose you at the end of the term so they wanted to entice you to stay...this can work to your favour. I now pay 1% BELOW base rate and have done for over 2 years.

check your t&c's before you make a move.

 

[Archie_tect]

Thanks all, I had agreed to take the new Fixed Rate deal 'over the phone' and the paperwork arrived this morning. I think I will give the bank a ring to say I have considered my options and will just let things ride for the remainder of my (less than) three years commitment. It will be nice when it's all paid off I must admit.

Thanks again,

Bill

Bill, Another option is to revert to their standard variable tracker rate but pay £230 into it rather than the minimum each month or as much as you can by standing order [so you can adjust the amount when you need to]... that way you will reduce the balance so the interest reduces with the steady reduction in amount owed. It'll reduce amount owed significantly over the 3 years and save even more. Even at a variable rate of 3.5% or whatever it is, you couldn't get that on a savings account, so win-win!

We did that with our endowment variable tracker mortgage and paid the borrowing off 7 years early, but kept the endowment element going to the full term so we'll get the lump sum at the end.

 

[biggs682]

we are facing same decision , but really cant make our minds up . a lot of banks only offer lower rates to higher value mortgages rather than to all .

 

[Glow worm]

I took out a 5 year fixed rate last year, because I though the rates will only go up.

We did the same last year damn it, as all the signs were the rates were about to go up. Now looks likely they'll stay low for at least a year- possibly more.

 

[TheBoyBilly]

Archi_tect, as with pensions I am at a total loss with mortgages. My initial mortgage adviser has moved on and he was somebody who I trusted. I initially borrowed £51000 on my first flat with an endowment to cover it. Then I moved house to the coast and remortgaged and got 'a top-up' endowment with another company for £36000. I have since moved lender to First Direct and took out the 5 year fixed rate. As others have mentioned, I seem to have got that one wrong as rates have dipped. I pay £538 an month of which approx £410 usually pays the interest (the other £128 bringing the capital down) With the new offer the interest will go down to £230ish (that's one real reduction eh?) but it seems from the phone converstion that at First Direct's current rate my interest will be a fair bit lower still. It seems that I will not be risking too much to go with the lower current rate. It would take some jump to get anywhere near the £538 which I have got used to paying out monthly anyway. It's a bit of a gamble but I don't think I will come unstuck in such a short time. Do you agree?

Bill

 

[TheBoyBilly]

Johnny jeez, I will check my Ts and Cs, thank you

Bill

(ooh look my 1000th post )

 

[Paulus]

Bill, Another option is to revert to their standard variable tracker rate but pay £230 into it rather than the minimum each month or as much as you can by standing order [so you can adjust the amount when you need to]... that way you will reduce the balance so the interest reduces with the steady reduction in amount owed. It'll reduce amount owed significantly over the 3 years and save even more. Even at a variable rate of 3.5% or whatever it is, you couldn't get that on a savings account, so win-win!

We did that with our endowment variable tracker mortgage and paid the borrowing off 7 years early, but kept the endowment element going to the full term so we'll get the lump sum at the end.

+1 You will pay off the mortgage a little quicker so saving some extra money. That is If you can manage without the £60 you would save.

 

[Archie_tect]

++ That's what we did and I'm desperately hoping it was the right decision!

That sounds ominous Uncle Mort...

 

[Archie_tect]

Archi_tect, as with pensions I am at a total loss with mortgages. My initial mortgage adviser has moved on and he was somebody who I trusted. I initially borrowed £51000 on my first flat with an endowment to cover it. Then I moved house to the coast and remortgaged and got 'a top-up' endowment with another company for £36000. I have since moved lender to First Direct and took out the 5 year fixed rate. As others have mentioned, I seem to have got that one wrong as rates have dipped. I pay £538 an month of which approx £410 usually pays the interest (the other £128 bringing the capital down) With the new offer the interest will go down to £230ish (that's one real reduction eh?) but it seems from the phone converstion that at First Direct's current rate my interest will be a fair bit lower still. It seems that I will not be risking too much to go with the lower current rate. It would take some jump to get anywhere near the £538 which I have got used to paying out monthly anyway. It's a bit of a gamble but I don't think I will come unstuck in such a short time. Do you agree?

Bill

Bill,


Sorry, I've got confused... you've got a total borrowing of £87000 which started in 1986, all in endowment mortgages, with 3 years to run?... Just to check, have you been receiving the forecasts from the endowment companies confirming that the endowment fund will cover the full £87000 loan, or has the borrowing reduced because you've been paying off the capital? Yoi should be OK with an endowment fund started before 1990 since you'll have built up a level of annual bonuses which they can't take off you.

How much of the monthly payment is covering the endowment policy? In an endowment mortgage you still owe the full amount borrowed at the end of the mortgage term which the endowment fund was designed to cover, unless you've been reducing the capital sum.

I'd keep the monthly mortgage payment high as you can which reduces the borrowing capital each month from the balance and keep the endowment element payments going once the capital is paid off and you effectively no longer have a mortgage, until the end of the term as investment [should come back eventually with- hopefully- some sort of final bonus].

 

[TheBoyBilly]

Sorry Arch_tect I should explain a bit more. I took the mortgage out in 1994 over 20 years. I pay First Direct £538 per month to cover the interest plus take a little off the loan (I can't remember how that figure was arrived at mind). I have two endowments (one of which has informed me of a potential shortfall) of £158 and £133 a month respectively. A total monthly outgoing towards my mortgage of £829 or so. I have reduced the loan by more than the predicted shortfall but not by much.....£4k or so. But hopefully that will continue to come down.

Bill