House buying, mortgages, insurance, etc

[parsforlife]

3 hours ago, Molotov said:

 

An alternative approach is to overpay some extra into your mortgage and stash the rest in an isa or a pension.

 

That's my general thoughts, If the maths is working out similar then there's absolutely no reason to go down just one route.  Spread of investments is generally a good idea to help mitigate risk.

[Trogdor]

Had the mortgage broker today. My current five year fix is up in July. Best rate was 4.09% for another five year fix. This is me firming up a fall back option if the market gets worse before August.

Will check the market again as renewal approaches. My current provider won't give me a renewal option until 3 months out from the term ending. 

My old rate was 2.65% so it's not as bad as I had been expecting. I had hoped five year fixes may have dropped below 4% but alas not.

[throbber]

I can get a fixed rate term of 4.04 % for 5 years meaning my repayments increase by 30% a month (£235 increase) or go on the variable in the hopes it will come down and initially be paying about £550 additional in the hopes of a dramatic fall coming before 24 is finished which I just can’t see happening.

[alta-pete]

1 hour ago, throbber said:

I can get a fixed rate term of 4.04 % for 5 years meaning my repayments increase by 30% a month (£235 increase) or go on the variable in the hopes it will come down and initially be paying about £550 additional in the hopes of a dramatic fall coming before 24 is finished which I just can’t see happening.

Seems a bit of a wild mismatch. What are they offering you as the variable rate? 

[throbber]

1 hour ago, alta-pete said:

Seems a bit of a wild mismatch. What are they offering you as the variable rate? 

When I said £550 additional I meant from my original term I’m coming out of not the difference between variable and fixed rates so the difference between variable and fixed rates would be about £300 a month. 
 

It’s a bit complicated because I have two parts to mortgage as I moved house during a fixed rate term and had to take out a second part to cover the difference between the properties of that makes sense.

The second part has gone up in January by nearly £200 and we’d got a letter from our mortgage provider saying when our main fixed term comes to an end and we were to go on a variable rate we would be paying an additional £350 on that part alone but I can’t remember what the specified rate was.

[TxRover]

6 hours ago, throbber said:

I can get a fixed rate term of 4.04 % for 5 years meaning my repayments increase by 30% a month (£235 increase) or go on the variable in the hopes it will come down and initially be paying about £550 additional in the hopes of a dramatic fall coming before 24 is finished which I just can’t see happening.

Given it’s a £315 a month loss, how often can the variable rate reset and reduce, and is there a cap on reduction per month, per annum and/or total? It’s seems very unlikely you’ll see a reduction that would recoup your initial outlay over a 5 year period.

Example:  You pay a year at a roughly £315 per month higher rate, then you have to see a savings of £79 per month for the last four years. Even if rates begin falling immediately, you’d be unlikely to reach breakeven for 2-3 years, still resulting in a need to see very unlikely savings over the final 2-3 years. (Assumes you’ve been comparing an SVR with a 8% or so initial rate)

Edited March 6 by TxRover

[throbber]

1 hour ago, TxRover said:

Given it’s a £315 a month loss, how often can the variable rate reset and reduce, and is there a cap on reduction per month, per annum and/or total? It’s seems very unlikely you’ll see a reduction that would recoup your initial outlay over a 5 year period.

Example:  You pay a year at a roughly £315 per month higher rate, then you have to see a savings of £79 per month for the last four years. Even if rates begin falling immediately, you’d be unlikely to reach breakeven for 2-3 years, still resulting in a need to see very unlikely savings over the final 2-3 years. (Assumes you’ve been comparing an SVR with a 8% or so initial rate)

I don’t know about the change in variable rates but your second part is what I’m thinking ie how much extra will I pay a month and what will the interest rates go down to and when. If they even go down.

2 years fixed at 4.04% might be a better shout but who knows where the world will Have taken us by then?

[alta-pete]

5 hours ago, throbber said:

It’s a bit complicated because 

 

[die hard doonhamer]

2 hours ago, throbber said:

I don’t know about the change in variable rates but your second part is what I’m thinking ie how much extra will I pay a month and what will the interest rates go down to and when. If they even go down.

2 years fixed at 4.04% might be a better shout but who knows where the world will Have taken us by then?

Are you comparing fixed with the standard variable rate, or are you comparing it against an equivalent length tracker deal? Surprised the gap is quite as big if it’s the latter.

[throbber]

1 minute ago, die hard doonhamer said:

Are you comparing fixed with the standard variable rate, or are you comparing it against an equivalent length tracker deal? Surprised the gap is quite as big if it’s the latter.

I am not entirely sure as we haven’t received the documents through yet. I’m just basing the figure on what the bank had sent us back in January time about what our repayments would go up by. I think they do that on the basis we just carry on automatically.

[die hard doonhamer]

Just now, throbber said:

I am not entirely sure as we haven’t received the documents through yet. I’m just basing the figure on what the bank had sent us back in January time about what our repayments would go up by. I think they do that on the basis we just carry on automatically.

That’ll be the standard variable rate. I’d definitely be avoiding going on to that. 

[throbber]

13 minutes ago, die hard doonhamer said:

That’ll be the standard variable rate. I’d definitely be avoiding going on to that. 

That’s what would happen by default if you didn’t renew I’m sure. I think we were on standard variable for a year or something around the 2018 mark as neither of us looked at changing our mortgage deal when our first fixed rate came off but think interest rates were fairly consistent around then and it didn’t make much difference.

[Alert Mongoose]

56 minutes ago, die hard doonhamer said:

That’ll be the standard variable rate. I’d definitely be avoiding going on to that. 

Made that mistake myself. Was busy with work when the letter arrived stating my current fixed mortgage period was up so just chucked it in the pile of mail (the to-do mail pile that generally never gets done).  Was at the height of lettuce gate so at the worst possible time. 

Next month came around and my mortgage went from 0.98% to 8.7%. Worked out to be a good motivational tool to get it sorted for the next month is all I'll say.

[throbber]

26 minutes ago, Alert Mongoose said:

Made that mistake myself. Was busy with work when the letter arrived stating my current fixed mortgage period was up so just chucked it in the pile of mail (the to-do mail pile that generally never gets done).  Was at the height of lettuce gate so at the worst possible time. 

Next month came around and my mortgage went from 0.98% to 8.7%. Worked out to be a good motivational tool to get it sorted for the next month is all I'll say.

I take it if you forget to renew and your mortgage goes onto a variable tracker by default and your monthly payments don’t change by much that means you aren’t getting shafted in interest? Asking for a friend obviously. 

[Alert Mongoose]

I guess so? Mine more than doubled but maybe the variable tracking rate is much lower now.

[Hedgecutter]

On 01/03/2024 at 10:58, SH Panda said:

Pretty much the worst financial decision people routinely make is leverage heavily to buy a house they can barely afford that becomes a mill round your neck.

As a general observation from my social circle at least, there seems to be a tendency for folk to go straight to the 'forever home', rather than going up the 'housing ladder' (which you hear about near-daily, but seems to be a lost concept to the under 40s).

I don't ask about their finances, but when you have even modest interest rises on what's probably upwards of 200k debt on a house early on in the term, then that's going to fairly hit the drinking kitty.

[throbber]

8 hours ago, Alert Mongoose said:

I guess so? Mine more than doubled but maybe the variable tracking rate is much lower now.

This would have been about 2016 or -17 I can’t even remember. The rate went up a bit but we just assumed that was that and didn’t look into it tile moved house. I think interests have been fairly steady and also low until about 2 years ago and it’s spiked now. It’s why there was such a housing boom that has slowed down since about 22 and is now looking pretty grim.

[Leith Green]

1 hour ago, throbber said:

This would have been about 2016 or -17 I can’t even remember. The rate went up a bit but we just assumed that was that and didn’t look into it tile moved house. I think interests have been fairly steady and also low until about 2 years ago and it’s spiked now. It’s why there was such a housing boom that has slowed down since about 22 and is now looking pretty grim.

Your situation seems quite complicated due to that other mortgage etc. Would you maybe be best to go to a financial adviser specialising in these things?

We were looking to do a big extension pre covid (all been shelved now, thank f**k) and couldnt work out how to finance it - some decent advice really helped us see the possibilities.

[Gnash]

11 hours ago, throbber said:

I take it if you forget to renew and your mortgage goes onto a variable tracker by default and your monthly payments don’t change by much that means you aren’t getting shafted in interest? Asking for a friend obviously. 

It doesn't mean that.  If someone moves on to the SVR, they are almost certainly paying a much higher rate than they could pay if they shopped around for the best deal.  

As an example of how this might happen, say someone gets a 5 year fixed rate mortgage when rates are relatively high, so their rate is 5%, while prevailing SVR at the lender is 8%.  Over the 5 years, rates come down so they could get 2% on a new 5 year fixed deal.  But they stay on the same mortgage and move on to the SVR, where the rate is now 5%.  Their monthly payments don't change, but they could be paying a lot less by moving to the new fixed rate deal.

[throbber]

2 hours ago, Leith Green said:

Your situation seems quite complicated due to that other mortgage etc. Would you maybe be best to go to a financial adviser specialising in these things?

We were looking to do a big extension pre covid (all been shelved now, thank f**k) and couldnt work out how to finance it - some decent advice really helped us see the possibilities.

I don’t actually have two parts to my mortgage when the 5 year fixed comes to an end this year and then I will have one overall mortgage.

i bought a house in 2019 and moved in 22 but was stuck to a five year fixed, some people pay to get out of the fixed term so they can move but we were able to take out a seperate loan for the difference in the two properties and that part of mortgage came to review in January and the bigger fixed rate term comes to an end in July and then it will be one mortgage.

 

thanks gnash - I didn’t get any reminders from my provider to tell me I was coming out a fixed term and just forgot about it. Neither me or the mrs were very good with our finances back then.