Our current mortgage lender have offered us a fixed rate for 2 years at 4.29%, at which I am so stummped by that I really dont know what to do.
Apparently they will not charge a booking fee, nor an early redemption fee.
After the fixed rate we would revert to 2.84% above the bank of england rate.
Obviously the Bank of England have been lowering the base rate recently, which has reduced our variable rate to 4.84%.
Ultimatley there is a decent drop in our mortgage repayments either way as we were on a fixed rate of 5.95 till Dec 08, so there will be extra spare funds that can cover the increase in living costs as there will be no wage rise for us this year, and there will also be some residual funds to go towards the IVA.
I think my problem is that I just cant believe it.
A few months ago I was worried thinking we would be onto a variable rate of 7.09% and coulnt afford it.
We are in our 9th months of our 60 month IVA, but I think we do have the extra 12 month clause if no equity is raised near the end.
It certainly sounds good, but I think I would be double checking the small print just to make sure!
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
Seems a reasonable offer but of course rates could fall further and you would miss out on any more savings. You must balance the stability of a fixed rate against any future savings but take into account that savings may have to be passed on to creditors.
I personally believe that rates will remain low for some time but given the weakness of sterling and the possibility of a change in government in the next two years, stability may be the best option.4.29% is a good rate and sounds affordable and given that you are in an IVA it would be impossible to better elsewhere. At least if rates do go up you will not have to go back to creditors for a variation to reduce payments and if they fall further you are not affected.
Finally, even if rates fall further there is no guarantee that lenders will pass on the savings as most operate a collar whereby rates will never fall below a certain figure regardless of what the Bank Of England base rate is.
Problem is though, the lender do not offer advice, only give info.
I've called our previous broker who has failed to get back to my second query. Now we are in an IVA I dont think any brokers will make money out of us so their advice is limited.
Also,
Whilst our IVA co wrote to our mortgage company to let them know when we entered into the agreement, I'm not keen to highlight this fact to them in case they revoke the offer!
So, I have read the small print and all seems ok, that why I thought I would see what opinions are on here!
I might give BrightOak a call, but at end of the day, they too are in business and not stand to make penny out of this either way!
xx
The other thought I had was, even if the lender pass on all of these rate cuts, then it increases the residual available to go into the IVA fund, so as the family with the mortgage we dont gain either way. What do you think?
Presumably though they have noted on their files that you are in an IVA - our company wrote to us and told us we were bankrupt!
At the end of the day only you can decide if this is a good deal for you, but I know where you are coming from with the 'Catch 22' situation.
If you pay less, then you have more disposable income. If your payments remain the same then you potentially have more equity to release at the end!
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
Yeap, but we're on an interest only deal, arnt you? So our monthly repayments will go down, regardless.
I did wonder about seeing if we could afford to change to a repayment scheme instead of paying the residual money into the IVA pot, this would have needed running past the IP, however the repayments were too high.
Makes budgeting easier to be on a fixed rate. I am on a 10 yr deal & I reckon with it being like swings & roundaboputs that I will probably end up paying the same as if on a variable rate overall BUT I know what is going out each month!!!
Hmm, wish we could get a longer fixed rate to be honest, but none available, its this or the SVR.
I keep trying to remember that IVA aside, if we were financially sound or like when we were first time buyers, 4.29% is great, and will be the lowest we've ever fixed at.
As I am a naturaly worrier though, my next thought is, what will happen in 2 years time when the 4.29% expires, what will the deals be like then. Have to give my head a wobble and remind myself no-one knows, and worry about that bit in 18mths time!!!
Beyond the 2 years, even if rate is slightly higher there will be deals and also our IVA was agreed at 5.95%, so unless in 2 yrs rates went higher then that, we could be ok under our current terms of IVA?
I must admit I like fixed rates - our mortgage and gas and electricity are all fixed. Like RHB says it's swings and roundabouts, but at least we can budget.
In answer to your question Flowerpot about whether I'm interest only - no, I'm on a repayment on a variable rate. My rate changes once a year (due to have lower payments from February).
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
This seems a good rate, you need to check there are no overhang penalties after the preferential rate has ended. In other words you are able to move away penalty free if you wish at the end of the fixed rate. Tony
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Trackers or discounted SVR rate policies are still the best deals and some are offered below base rate and we know will go lower to 0.5%.
You have a decent average mortgage rate given all the mortgage interest rates of all mortgages.As you are in an IVA etc...thats not bad at all.
The sting would be that by 2 yrs time the base rate should if the economy recovers revert back to the norm.....and if that is so and in an ideal world interest rate should be around 5% or 6% pre-credit crunch levels for the UK. [15% in the 80s under G Howes.]
Now in two years time 2011 you could cough up 7.84% for mortgage interest. But thats two yrs away.
My thinking here is that as the government is printing more money -inflation will slowly rise along with interest rates and getting Banks to lend 'new' money.(3 currrent objectives to resolve)
But that excess of 'new money' printed have to be mopped up by BOE to reduce money supplies and restore supply to normal. Then the Banks will have less money in their coffers, and as we spend more - interest may go up to control overlending as we have now experiencing.
Its my opinion not fact, till we get there - interest rate reductions is one of the reasons in the past have lead to our crisis due to insane borrowing, so would you reduce interest rates again for Round 2. Probably not
I suspect interest will be back to 6% or 7% in two years.
