Mortgages

[Mark]

I'm in a bit of a quandry at the moment about my mortgage.

Currently I'm on a fixed rate 5.80% mortgage until the end of 2011. That's with a mutual society (Coventry), so it's a relatively safe bet that their house is in order at least as far as not having any lurking skeletons goes.

Lloyds TSB/HBOS today offered me a 5.14% rate that while lower, works out at the same monies once charges are added, but fixed to 2016. They do now have skeletons. Billions of them.

Or, I could save £50 pcm with Lloyds, or £20 with Coventry, by switching to a two-year fixed deal (3.69% with Lloyds, can't remember what the Coventry said).

Now, the adviser at Lloyds suggested getting a longer-term mortgage because rates are likely to go up a lot (numbers in the 7%-8% region were mentioned, at which point I mentioned Norman Lamont). However, their reasoning seemed at least a little flawed - their rates may well be on the up to pay back all that debt (in fact, it looks like they went up a bit while I was in the branch), but to suggest that the MPC (Bank of England) would up rates like that in the middle of a recession (maybe depression) to me seems naive to say the least. Surely they would only up rates on that scale if inflation reared its ugly head.

So, my reasoning goes like this - look for better short-term deals at a building society, or long-term deals at a bank (of which, beyond providing certainty, I'm not sure the Lloyds/C&G 5.14% deal above qualifies).

Is my reasoning sound or have I missed something glaringly obvious?

PS - I won't hold anyone responsible for the consequences. That couldn't happen anyway as I haven't provided all the facts - just the relevant ones.

[Brynn]

My arse rates are going to go up. Probably not for a good year, possibly two. According to Mr. Darling on the radio, its going to take at least six months to get out of the recession. 2010 was mentioned too.

You could do the 3.69% rate, but pay the amount you would at your 5.80% as that would help with overpayments, as I am assuming that the extra money needed from the change in rate isn't needed.

Thats what I am doing just now, at a 2.9% rate but still paying like its a 6.5%. Bring on £500 a month overpayments!

[Mark]

It'd be more like £100 a month overpayments, but absolutely yes I would.

You and I seem to be in agreement over the overall situation, but that just leaves the matter of Lloyds' own situation. Is it worth risking a £1200 saving knowing that if Lloyds do have to shunt their rates up to clear all that government debt, the fees to secure a better deal elsewhere could easily obliterate that saving.

Any good mortgage comparison sites out there I can go have a play on?

PS - my desire to get to the bottom of this quickly is because Lloyds will only hold the quotes I've got until Monday/Tuesday so if they're what I want (which as I've already said I'm not convinced yet) then I'd have to act this weekend. Pressure tactics or what?

[Halfmad]

Oddly I've noticed that advertised loan rates have shot up, could be my imagination though. Got a flyer through this morning from RBS, my load taken out 18months ago was at 8.9%, they're now charging 13.9% "typical" for the same amount and same deal.

Perhaps it's just my imagination after all but it seems like interest rates are going down but bank interest rates to customers are actually creeping up.

[Mark]

It isn't your imagination. The Lloyds loan rates I've seen went up before the BofE started decimating the base rate. They haven't gone down at all since, though if you're a long-standing customer you do stand a chance of getting a better rate than advertised. Unless, of course, you're with Egg (of Citigroup fame), in which case you get a worse rate from them. Grrr.

[Mark]

Does anyone know of a good mortgage repayment calculator? I need to plug in some numbers and decide which of the deals I've been offered is best.

FYI, the deals are +2.99% tracker for three years, 3.99 fixed for two years, 4.59 fixed for five years. All staying where I am (building society). Right now, the tracker is the cheapest (even though it does have an arrangement fee), but that only holds if the base rate stays where it is. :dunno:

[Tak]

Does anyone know of a good mortgage repayment calculator? I need to plug in some numbers and decide which of the deals I've been offered is best.

http://news.bbc.co.uk/1/hi/in_depth/business/mortgages/default.stm

any good?

[Mark]

Yes, thankyou.

[Rich_L]

The reason they are saying interest rates are high is the bounce-back effect, interest rates have been slashed, QE is starting and suchlike which potentially means if it works and we ride out the recession, could see inflation returning even higher, which normally means the BoE rates climb to try and counter-act it.

I'd be tempted to go for the fixed until 2016 - 7 years of knowing your exact repayments to budget around can't be a bad thing IMO especially if they are affordable. The other option is gambling on a lower fixed rate on the basis that there will be a better deal available - but it would only take the base rate to be 3% (not a massive amount) on a +2.99% and you'd be hurting.

[Mark]

I'd be annoyed, but I wouldn't be hurting, because I'd still be on a rate that's lower than the one I'm on now (if only by 0.05%). :)

Fair point though, which is why I'm considering the 4.59% for five years. I will also go look at the C&G rates again as those ones were quoted when the base rate was 1%. I'm not expecting much though given the mess LBG have got themselves in.

PS - just to add some real figures, the amounts I've been quoted are:

3yr +2.99% capped at 5.75% - £717.63
2yr fixed 3.99% - £736.25
5yr fixed 4.59% - £760.21

[Mark]

Still pondering. I've recognised the potential danger in the tracker (1% rise in base rate would wipe out all the savings - something that's entirely possible even if CPI went in the wrong direction this month).

However, I can't break the deadlock between the other two. It all depends on how much of any future rate rises they pass on (they only passed on 1% on the way down, so I wouldn't expect them to pass it all on on the way back up). And, to add to the confusion, I'm also trying to figure out if going the Offset mortgage route would be better.

So, does anyone know good places to look for advice on mortgages? I realise it's pretty much going to be guesswork given the unprecedented nature of the economic situation, but I'd like it to be at least informed guesswork. ;D

Thanks all for bearing with my mortgage ponderings. Indecisive by name, indecisive by nature. ;D

[Mark]

Just been offered a 4.59% offset fixed to 30.06.2014. That'll do me. Game over. Thanks for all the help. :)

[Admiral Huddy]

Puzzled as to why you want fixed rate at the moment?

[Mark]

Which way are rates likely to go in, say, 12 months? There's no realistic scope for any further rate cuts from the BofE, so the only way rates are going to go down further is if LIBOR rates improve, which given the state of the market seems unlikely (in fact, some lenders are putting up their rates already). Where we go after this is anyone's guess, but an unhealthy dose of stagflation (as happened in the 80s) is a possibility, so if rates are unlikely to go down by more than .5%, and there is some upside risk, then I thought it best to lock in near the bottom.

If I had a bigger mortgage, I'd probably do something different, but on £80k I'm just at the point where the costs of getting a good deal elsewhere (it typically requires £995 fees to do that at the moment) wipe out most or all of any savings that can be made.

Or have I got this all completely wrong? (I've not signed anything yet)

[Admiral Huddy]

Well I can't see them going up in the next year and even if they do even a few % is still very low. Personally, I would get yourself a variable low rate in which you can overpay, say on the basis of a 5%. That way, you'll reduce the term and save £££££ on interest should the rate rise again and if they do rise again, then it doesn't affect your monthly payments, only the amount you overpaying.

ING do a good flexible mortgage, but they may have stopped them for this very reason.

How much are you current monthly payments if you don't mind me asking?

[Mark]

£800, and that'll not be going down as a result of the lower rate. Also, I have no savings in the bank. None. In fact, I've never had any savings. In the current climate I think you'd agree that's risky and I need to fix it, so priority is debts first, then savings, then increasing the mortgage payment.

Oh, and because it's an offset account, I'll be getting equivalent of 4.59% net on any savings I do put aside once the debts are gone*. Try finding that on the high street. :)

I don't think it's a bad deal.

* Some of the money currently used to clear debts will get saved, some will go on much-needed house repairs, some on fun things.