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Mortgage Question

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Hi - I've currently got a mortgage with Nationwide which was a 5 year fixed rate that has just reached the end of its term. As a Nationwide customer I have now gone on to a rate of 2.5% which basical… Read More
dinglebin Avatar
6y, 9m agoPosted 6 years, 9 months ago
Hi - I've currently got a mortgage with Nationwide which was a 5 year fixed rate that has just reached the end of its term. As a Nationwide customer I have now gone on to a rate of 2.5% which basically tracks the BOE base rate and assumes a rate which is 2% above the current rate. I'm nervous that the BOE rate will rise and the limited fixed rate products that are available at the moment will also rise too. I've seen a couple of good rates which offer a competitive fixed rate for 5 years with no set up fee. If I obtain an offer is it valid for 6 months? I'm trying to put some sort of contingency in place whereby if the BOE rate rises I have a product sat waitingto fall back on that I set up while the BOE rate was low. In effect I want to become a Mortgage Tart. Obvioulsy you could only do this with products that had zero set up costs. Is this feasible or can they pull a product at any time even if you have received an offer? Thanks for any advice.
dinglebin Avatar
6y, 9m agoPosted 6 years, 9 months ago

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Each lender is different regarding how long their Mortgage Offer would last before you would need to start the process again (all will include the term in their Terms and Conditions of each individual product). I am also on the Nationwide Base Rate at 2.5% and plan on retaining it for the meantime. I don't think rates will increase very much in the next year and if they do it is normally by only 0.5%. Therefore, if you found a Fixed Rate just now at about 4.00% which doesn't attract any fees, your current rate with the Nationwide would need increase about 4 times before it got higher than 4% (hope this makes sense). Also, if you are in a position just now that you can afford to add extra to your mortgage payment it is the perfect time to do so due to the rates being so low. On the Nationwide Base Rate of 2.5% you can make as many overpayments by as much as you want and not incur any charges and it can reduce your balance immediately (should you select this option). This can either reduce the term of your mortgage or make your future monthly payments less depending on what you want. You would be surprised how much you can save in the long term by reducing the term of the mortgage by making small additional payments just now.

Hope this makes some sense to you but if not just ask anything you want.
It's not just the set up fees you have to check. At the end of some rates, there is occasionally a period in which you have to stay on the base rate or with the bank, otherwise you have to pay the lender an early redemption fee (which can be quite hefty). If you read through the terms and conditions of the product you took, you need to check the expiry date of any early redemption fee.

Assuming that it expired at the same time as your fixed rate, yes, you can go ahead and get a mortgage offer from another lender but I highly doubt it will be valid for 6 months. We used to have a 3 month period on our mortgage offers, simply to cover ourselves against any changes in rates
Mortgage offers can be withdrawn at any time, no way will you be able to take it up later if rates change.

I'd fix now if you get a good deal as there is only one direction for rates to go. It's a question of when and by how much.
In my experience, banks treat these offers as items on a shelf, once it runs out it's gone. I had an offer of a cracking good deal to move mine about, but didn't get the paperworkk back straight away. They rang me the next day to find out if I still wanted it, as it was running out. As it happened, they were doing a new almost as good deal the next week, so I held out for that one. That's what she told me anyway - Halifax at the time. Limited edition offers - just not advertised as such, so they can get you when you ring up, 'oh, sorry we've stopped that one now, do you want this one instead?' If it's a good deal and you want it, get it now. Once the rates start rising, anything under 5 or 6% will be miraculous. Don't expect them to sky rocket like they did in the 80's though. I'm on a base rate tracker, which at 0.19% above base, ROCKS. Obviously I won't think so in 18 months time when it's all back up to 5.5% but hey - take the lows with the highs, it all balances out.
Thanks Stuart - It all makes sense what you have said and is something I have considered doing. It is a game of chance and the rate could rise quite quickly. Although saying that a quick rate change would cripple thosands of people so I agree that it seems unlikley. Our mortgage repayments dropped by £160 per month. Its lightened the pressure as we have a new born which has consumed a big chunk of that saving however im keen to start overpaying. Do you know of any calculator that shows how much you can reduce from your mortgage by overpaying. I'll look on google now to see if there is anything.
stick with NW base rate

cheapest fix is about 5% and no way will interest rates go up 2.5% in just a year or two

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