Hi qwerty,

If you are any good with Microsoft Excel you could input this yourself, build a table of the amount and the interest rates, to give yourself a break even point, or a savings amount.

You can probably find some calculators online for this.

Enjoy yourself.

Sparky.

Hi

Thanks for responses.

OH- im not worried at all! I have purchased the house and got an absolute bargain. Its just something i want to know to satisfy my curiosity - to know how business savvy i am! (or are not)

Cheers

Q

I agree with Sparky. I think if you are in a quandary, you should go to an Independent Mortgage Broker, who will run through the options with you. You can only make decisions based on what information is known. Who knows where interest rates will go. Do you think Mervyn King, Alisdair Darling or anyone else has a clue? We are in unchartered territory in regard to the UK and world economy. If you are a risk adverse person take the best fixed rate you can obtain.

I have heard several economists who believe that the BOE base rate will be kept low 1% or less up to 2012 or 2014. This is due to the state of the world economy, which is going to take years to turn around. There are trillions of pounds/dollars of debt, that have to work there way through the system. Until the debt picture is clearer , banks will be cautious with lending, whatever pressure is applied to them by the government.

Huckster

Hi Qwerty,

I think you need to stop worrying about this.

To put it bluntly your only current choices are:

1) Stay on your current rate:

2) Remortgage, and possibly pay thousands doing so (Early Repayment Charge, solicitors, application fees)

a) and go for a Tracker, which would be cheaper now, and most likely equal in the next 12-24 months then more expensive in the last 3 of 5 years. so does it actually save you anything?

b) and go for a new fixed rate which might be cheaper based on the equity. (for every 0.5% is about £300 a year difference, or £50 a month) So would this be greater than the remortgaging costs?

A quick comparison on the main site will give you the offers and costs to apply for a new mortgage, you can contact your current lender for more information on the repayment (settlement) of your mortgage.

You already have the benefit of knowing how much your repayments are for the next 4/5 years, there isn't much certainty around anything else (other than mortgages are getting more expensive, and the BOE base rate will go up).

It is not certain that you would be offered a new mortgage, or one at the best rates.

I hope that wasn't too blunt, but you are wasting your energy worrying about something that you have taken a safe decision on.

Sparky.

Hi

Thanks for previous answers. I have a follow up question to this which might be a bit of a challenge to work out!

I want to work out a 'correct decision %' in 5yrs time from the start of my mtg. i.e. if in 2015 the rate is 6% i was right to make the 5yr fixed rate at 5.28%, or maybe if it is 4.3% i would have been better off not fixing.

Bit of a challenge and not entirely sure that this is calculateable given the number of mtg products on offer?

Thanks kindly

Jay

Thanks very much for your detailed response. That helps alot. If your prediction is correct then i definitely made the right decision to go fixed!

Hi Q

I think Jay has got there before me - a pretty impressive answer! Thanks Jay.

Borrowing £61.995 at 5.28% would mean a monthly payment of £372.60 (in the first month £272.78 would go to pay interest and £99.82 would pay the balance - the interest will gradually reduce and balance payment would increase over time).

If the tracker was £320.43 a month, the interest rate would be 3.80%

At 4.8% you would be paying back £355.23 a month. (1% above)

At 5.8% you would be paying back £391.89 a month.(2% above)

At 6.8% you would be paying back £430.29 a month. (3% above)

I personally think base rate will go up from 0.5% to atleast 5% within a few years, a rise of 4.5%

4.5% ontop of 3.8% = 8.3%

At 8.3% you would be paying back £490.87 a month (for the first month that would be £428.80 of interest and £62.07 balance).

Hope this helps, Jay

Louise

Thanks for your detailed response. Can you please confirm how much a payment might rise then if say i had a tracker and im paying £320 per month and the base rate rises to 1%, 2%... how much would i have to pay.
(i borrowed £61,995 on an £87k property).

thanks

Hi Q

1. I think life is pretty stressful anyway without worrying now if your decision is going to prove right in 5 years time! However, hypothetically, the benefit of fixing will completely depend on what happens to variable rates over the next five years. Currently there is around 0.5% difference between the average tracker rate and the average fixed rate (trackers as you point out having a low interest rate). So you are now paying slightly over the odds. However, it is very likely that variable rates will rise considerably more than 0.5% over the next five years - and you will be in a very positive position.

It is of course true that no one knows what will happen. However, taking a fixed rate in reality buys you peace of mind against unaffordable rate rises. Really, you should not usually take a fixed rate to 'busk the rate trend and gamble on coming out in front' because normally no one can predict the future. We are currently is a slightly different position though, because the Bank of England rate is only 0.5% - so realistically it cannot fall much further and then the only way is UP!

2. 5.28% is a percentage of the amount you borrowed. In effect, on a capital and interest mortgage the interest portion is higher in the early years (because you owe more) and so you pay off less capital in the early years - and more towards the end.

3. Yes you can have a part and part mortgage. However the Lender would need to understand what investments you have in place to repay the interest only portion of the mortage at the end of the term.

Testing questions for the week-end - I hope I have gone some way to helping!

Hi

I recently took out a 5yr fixed rate mtg at 5.28% and i have a few questions im hoping someone might be able to advise on. I borrowed £61,995. Now wondering if i made the right choice (i liked the idea of knowing exactly what im paying!)

1.Thinking ahead; So i can understand in 5yrs whether i made the right choice! (this might help for any future decisions i make) can anyone advise on the current tracker rates. If i recall the tracker value came out at about £320. (Can’t remember the rate) and the 5.28% fixed rate i am on is just over £372.60. So £50 per month over the 5yr term is £3000 – i may be able to work out the difference!

How much might it then cost more if the base rate rose to 1%.


2.Regarding my 5.28% rate; What exactly is the 5.28% a percentage of? It must of course be 5.3% of the mtg amount (£61,995)! But can anyone clarify exactly what part of it i am paying off and how that relates to the £372.60 payments.

3. Can you do part/part mtgs i.e. could you do fixed on £30k, and variable on £30k?

All advice appreciated.

Thanks