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Changing from fixed rate to tracker/variable mortgage-worth doing?

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I've had my house on the market for seven months but have just pulled it off due to the stagnant housing market. I still want to move, and am planning to put it back on in the next 6-18 months. I currently have a 2 year fixed rate repayment mortgage at 5.44% which runs until June 2010. With all the interest rate drops I was wondering if I’d be better moving to a tracker or variable rate one until the rates start to rise again, even though I’d have to pay an early redemption fee on my current mortgage.

 

My current mortgage stands at just under 90k and with the fee I’d have to pay back around £92k. Ideally I’d also like to take out a bit extra (around 8-10k) to do some home improvements to make my current house more saleable, but would only do this if I could comfortably manage the monthly repayments.

 

Is changing my mortgage worth doing?

 

A x

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Around £105k - I think I have about a 75-80% LTV ratio.

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depends on how much money you have , they may not allow you to change it, plus a lot depends on how much the house is worth, plus the % points they have put on between the BOE Rate as risen so that there is no or little difference between what you are paying now and what you will be able to get ( eg 3% above BOE rate with 25% deposit ) your house must be worth more than 25% more than you are wanting to borrow or that 3% will increase. The more money you have between what you want to lend and the value of the house will dictate your rate. So at th ene dof the day you might as well stay where you are.

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If you can find a way of doing it and get a really good rate on your tracker then it's definitely worth doing (assuming of course that interest rates don't end up at 15% like they did in the late 80s).

 

Whether you can find a lender who will offer you a decent tracker with your circumstances is a different matter- I consider myself lucky not to need to move or refinance during this tough time.

 

My tracker is currently at 0.45% above base rate and is shrinking as part of a tie-in for the last decade of my mortgage (to keep me at my current lenders until the end of my term). At 11 years I was on a 0.95% tracker when they offered me a shrinking tracker, which will end up at 0.25% above BoE base rate for the last 3 years of my term, which I think is too good a deal to be going elsewhere.

 

This is coupled with monthly overpayment (every time my payment shrinks I change my overpayment to take me back up to the same payment) and the interest being calculated daily, so now my balance is really starting to head downwards, with 8 years to term.

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Around £105k - I think I have about a 75-80% LTV ratio.

 

I would recommend you stay as you are for the time being, especially if your planning on moving in the near future. The difference in the rates available would mean it isnt worth paying the redemption fees to get out of your current Mortgage plus to honest if your looking at 80% ltv the rates are not that much different to the one you are already on and plus you would have arrangement fees to pay etc. Sit it out for the time being and look to get a better deal when your current rate ends. Drop me a PM a couple of months before your fixed rate ends and I will be able to search the market for a good deal for you.

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I've had my house on the market for seven months but have just pulled it off due to the stagnant housing market. I still want to move, and am planning to put it back on in the next 6-18 months. I currently have a 2 year fixed rate repayment mortgage at 5.44% which runs until June 2010. With all the interest rate drops I was wondering if I’d be better moving to a tracker or variable rate one until the rates start to rise again, even though I’d have to pay an early redemption fee on my current mortgage.

 

My current mortgage stands at just under 90k and with the fee I’d have to pay back around £92k. Ideally I’d also like to take out a bit extra (around 8-10k) to do some home improvements to make my current house more saleable, but would only do this if I could comfortably manage the monthly repayments.

 

Is changing my mortgage worth doing?

 

A x

 

In a single word no, as you probably would not get a mortgage rate as good as your present one, if the value of your home is 105k and you require a mortgage of 92k.

In respect of home improvements again I would say 8 or 10K is a lot to spend before selling the property and you may not get this outlay back.

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I will echo the previous two pieces of advice. Sit it out untill the fixed rate elapses

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You took out a fixed rate of 5.44% in mid 2008??!!

 

I know its easy to be wise in hindsight, but not sure this was the cleverest thing to do. You could have got a 0.99 (at least) above base rate tracker back then. You would now be paying 1.49%, and would have been for the majority of the time since then.

 

But these trackers are long gone. Think it is best to sit tight for now.

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You took out a fixed rate of 5.44% in mid 2008??!!

 

I know its easy to be wise in hindsight, but not sure this was the cleverest thing to do. You could have got a 0.99 (at least) above base rate tracker back then. You would now be paying 1.49%, and would have been for the majority of the time since then.

 

But these trackers are long gone. Think it is best to sit tight for now.

 

It all depends on what happends, if the base rate skyrockets everyone on trackers will be singing a different story (i'm only jealous as i'm tied into a fixed as was advised in mid 2007 when we took it out).

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It all depends on what happends, if the base rate skyrockets everyone on trackers will be singing a different story (i'm only jealous as i'm tied into a fixed as was advised in mid 2007 when we took it out).

 

No not jealous, you're right! Hindsight is a wonderfull thing, back then in 2008 I was forced onto a 0.99% above base tracker as the booking fee for fixing @ 5.5% where over £2k to be paid upfront but the tracker had no fee and no tie in. Its worth noting that at that stage everyone the banks included thought base rates where going to go up so the people fixing where doing the right thing at that time unfortunatly for them the base rate went the other way as the recession destroyed the premise of high inflation. Good news for me and others on tracker rates, bad news for anyone who thought they where doing the right thing fixing.

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You could calculate the value over two years and use an average rate. Rather than work on speculation - you can actually work out a value as to whether you would be better refinancing or not. My mortgage rate is 5.49 and it was on a 5 year fixed. I have two years left. I calculated how much it would be to come out now and move onto a lower tracker rate - it worked out pretty much the same (but obviously I had to bear in mind the interest rate could probably rise). Therefore, whilst the rates are low - the market is swings and roundabouts and people take out fixed rates for the security of knowing that your payments will not rise above that. Therefore, whilst you are probably thinking how nice it would to be on a lower rate, you made a calculated decision at that time to go fixed.

 

Furthemore, you say you wish to sell with 6-18 months. If you were to come out now and get another mortgage - the majority of them will have admin fees (incl your own closure fee) etc and the portability costs may be more expensive in the longer term. If you stick with the remaining term on your mortgage now, when you come to sell - you will either be in a position where you are out of your fixed rate period and can negotiate a better mortgage with no only your current lender - but any lender which opens up the market for you or your repayment charges will be markably lower again giving you increased options.

 

The lower rates are extremely attractive, but people should sit down and actually calculate the possible savings over a defined period (for example 2/3/5 years) and then the cost it is to come out of your current mortgage plus the cost of any new products.

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