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Mortgage switching to low variable rate
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My fixed rate mortgage (currently 5.9%) ends next month and the mortgage description then says it switches to 'a variable rate which is 1.69% above the base rate until the end of the mortgage term'. So does this really mean, with the base rate currently 0.5%, that it will revert to 2.19%??! And stay there for as long as the base rate stays at 0.5?! I can't believe it will be so low, because you can't get such a low rate by switching can you, or for first-time buyers? Please confirm to me that mortgage companies cannot change the agreements they have with you...... Thanks!
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No best answer has yet been selected by sten102. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.I agree with buildersmate about the rates.
However, assuming you have a repayment mortgage rather than an endowment or interest only mortgage, I would suggest that you do not lower your repayments, leave them at the level you are paying for the interest rate of 5.9%, increase the repayment amount if you can afford it, even by £50.00 per month. This has the double effect of reducing the term of the mortgage, and also the total accumulated amount of interest you will pay over the mortgage term.
When I got my last mortgage interest rates were about 12%, then they reduced dramatically, to about 3 or 4% I left my payments the same as when I was paying based on a 12% interest rate and within 5 years had paid off 25% of the capital.
However, assuming you have a repayment mortgage rather than an endowment or interest only mortgage, I would suggest that you do not lower your repayments, leave them at the level you are paying for the interest rate of 5.9%, increase the repayment amount if you can afford it, even by £50.00 per month. This has the double effect of reducing the term of the mortgage, and also the total accumulated amount of interest you will pay over the mortgage term.
When I got my last mortgage interest rates were about 12%, then they reduced dramatically, to about 3 or 4% I left my payments the same as when I was paying based on a 12% interest rate and within 5 years had paid off 25% of the capital.
Yes it really can be true! Our first ever mortgage together ran out last year after 3 years fixed. It dropped from £1050 a month to £350 a month. However as others have said I have carried on paying £1050 to reduce the term of the mortgage (and the interest) and it will give me a cushion when rates rise again.
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