New mortgage - which way to go?

[mancity68]

Curious to see how others are thinking about this before I speak to my IFA. Current fixed deal coming to an end so need a new deal. I want to stay on a fixed rate rather than tracker so the choice seems to be another two year deal on a very low rate or a longer fix with rate getting progressively higher. the gamble is whether the longer fix will beat any rise in rates. I know no one knows what will really happen but what sort of deal would you go for in same position?

[Loz]

I was looking at something similar. For the ones I looked at, the difference between a 2 and a 3 year fix was about 0.4%. So, you'd only be better off if interest rates go up by more than 1.2% in the next couple of years. Possible, but IMHO not likely.

[KidKruger]

May not be frugally perfect, but as long as Fixed rates aren't excessive I usually fix going forward just for the certainty in outgoings.

[LondonMix]

I'm with KidKruger.

I fixed for 5 years at 2% earlier this year (rates on offer seemed to have increased a bit since then). Maybe I would have been better on a floating rate contract or fixing for a shorter period but I preferred the security of locking in a super low rate for a long time.

[red devil]

Don't forget to factor in upfront costs like lender's arrangements fees, they can quite often make a difference to the headline rate. A broker should be able to do all the number crunching for you...

[Loz]

That's a good point, RD. Some of the 'arrangement fees' can be well over a grand, which if you are looking to change again in a few years time can be significant.

[Salsaboy]

Fixed, as I like to know how much I'm paying each month.

[Loz]

Yes, that's what the OP wants, but the question is : how long do you fix and what is the trade off between the length of fix and the increasing interest rates that the longer fix attracts?

[Otta]

I'll be doing this for the first time early 2016. But we have such a shit rate now that anything will be an improvement! I'll definitely be looking to fix again, but I'll be lucky to get below 4% I reckon.

[legalbeagle]

I'd think about:

Loan to value ratio (if you are about to significantly improve that go for a shorter term so that as soon as you can take advantage of improved L/V ratio you can)

Your income - if it's unreliable or at risk or dependent on tax credits or other similar things then go longer if you can for greater certainty

Your attitude to risk - do you really need to nail down where you are for the next five years on can you afford to gamble a little?

[LondonMix]

Otta you?ll definitely be able to get below 4% even for 5 years. You?re in Penge right? Equity builds up faster than you think.

[red devil]

Ots, you could do some groundwork now by getting your place valued by a few estate agents and/or doing it yourself on a site like Zoopla. That should then give you a good idea of your Loan to Value %. Once you have that info you can see what deals you would qualify for.

I used this broker for when I first remortgaged, they are fee free and independent... http://www.lcplc.co.uk/remortgages/remortgage/?gclid=COqK-vDH4sgCFUcUwwodDKkKKA&gclsrc=aw.ds

Again it wouldn't do any harm to contact them, or whoever you choose to go with, and give them all your info so that your new mortgage starts as soon as you're free to leave your existing deal...

[Otta]

Cheers RD, we used them first time out, and they've already sent us a reminder. It wasn't their fault we have such a bad deal, just the facvt that it was all that was on offer for a "help to buy" mortgage. Really quite annoying as we haven't taken a penny from the government, all they do is cover 15% if we default, the idea being that the risk to the banks is taken away.

So in theory the banks should treat you like anyone else with 20% deposit, but of course they choose to bend you over and give you a royal rogering because they can.

[Loz]

Also, check the rates vs LTV. If, after establishing the value, you have a LTV of, say 81-82%, try adding a few quid to the value to get it just below 80% and that may save you a couple of %age points. Last time I had a remortgage value done, the first question I was asked by the surveyor was "what valuation do you need?"!

[LondonMix]

I agree with Loz. To be fair my old lend Chelsea offered to put us automatically on the lower valuation amount even though we were a few percentage points above-- Chelsea track the value increase via a Zoopla like tool so even without a revaluation they give you some credit for general market uplift. However, we had done an extension since buying so we went with a brand new valuation and switched lenders as HSBC at that time had the best deal.

Between repayments and market uplift Otta you'll qualify for a much better deal now so expect to have a lot more disposable income from 2016 onward!

[Otta]

Fingers crossed!!!

[mancity68]

Cheers people. I have a reasonable LTV so can get 2.4% ish for a five year fix. Toying with certainty of that v 3 year deal on better rate and trying to be disciplined enough to try try and overpay. Which I wont! So longer certainty probably best.

[d4vejones]

Hi,

The best advice would be to go for a 2 year product now, expectations are we may see one or two base rate increases in the next 2 years. If this is the case you will be able to lock into / review things and get a good 5 year fixed in 21 months time (when you should be reviewing the next mortgage).

Locking into a 5 year product now will mean that in 5 years time you will be looking at a much larger rate when you come to remortgage, you are also tied in so will lose any flexibility and wont be able to take advantage of any house increases which would allow you to access better LTV products in 2 years if you went for the 2 year product.

Hope that makes sense.

David