Mortgage switching to low variable rate

[sten102]

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!

[buildersmate]

Right about the first bit, wrong about the second.
It will start at 2.19% but it will increase (or decrease) with any future change in base rate from the current 0.5%.

[DocHH]

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.

[bushbaby_de]

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.

[bushbaby_de]

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