Do you have a 'below base rate' mortgage ?

[Amethyst]

With interest rates expected to go down to 1% tomorrow - the lowest ever (lowest previously has been 2% in a few years up to 1892 and then for a month in 1932 and again in 1939) theres speculation what will happen with people on below base rate trackers.

Cheltenham and Gloucester offered a 1.01% below base rate tracker mortgage previously, and people on interest only deals will therefore theoretically be owed the .01%.

Should banks pay mortgagees to have a mortgage ?

Are there any tracker mortgages offered in the past at more than 1.5% below base rate ? Most seem to be 0.25% below base.


Our mortgage is half interest only and half repayment...monthly payments have almost halved as the interest portion has vitually been wiped out (we're on a 0.95 above base rate tracker) Should people on fixed rates look at moving their mortgage paying the ERCs - would this make a better deal in the long run ?

How much would you save moving from a 7.1% fixed rate with an ERC to an SVR ? Have you considered it or are you doing it ?

Is the low rate encouraging people to borrow on their equity whilst the rates are low ?

just some thoughts anyway.

[Paule]

Re: Do you have a 'below base rate' mortgage ?

Most Trackers have collars on them, so that they will only drop so low and no further.

Tracker Mortgages
Nationwide tracker mortgages reserved before 6 November 2008 have a floor* of 2.75%.
When the base rate fell to 2% in December 2008, we decided not to apply the tracker floor as a temporary concession.
On 8 January, the Bank of England cut the base rate to 1.5%. We will now apply the floor to affected tracker mortgage customers, at 2% which means that tracker mortgage interest rates will not fall below the level currently being charged.
This means that the interest rate on affected tracker mortgages reserved before 6 November 2008 will remain the same as at 1 January 2009 until the base rate rises back above 2%**.
Tracker customers will receive written notification of any changes to repayments.
We reserve the right to re-apply the original 2.75% tracker floor in the future. We will give notification to affected customers if we intend to do this.
Please note that tracker mortgages taken since 1 December 2008 have a floor* of 1%. If the base rate falls to or goes below 1%, mortgage interest rates for those trackers will not decrease further until the base rate rises back above this.
*A floor is a lower limit defined in tracker mortgage conditions, which means that if the Bank of England base rate falls to or goes lower than the rate of the tracker 'floor' the rate the customer pays will remain at the floor rate, plus or minus the differential (the set percentage difference from base rate) of the tracker product, until the base rate rises back above this.
**For example, if the differential of the tracker mortgage is +0.89%, and the base rate is 2%, the mortgage rate will be 2.89%. If the base rate falls to 1%, the floor will apply and the mortgage rate will continue to be 2.89%. If the base rate increases to 2.25%, the new mortgage rate will be 3.14%.

[Paule]

Re: Do you have a 'below base rate' mortgage ?

I am looking into changing my mortgage because of this rate drop

There is a great calculator, which was on one the news feeds, which will show what rate you need to get to offset any ERC you may have.

Are you stuck in a fixed-rate mortgage that no longer looks competitive?

Use our calculator to work out whether it is worth paying the early repayment charge to remortgage to a lower rate. Fill in your details below and it will show you what rate you need to achieve to make it worthwhile switching.

Early repayment charge calculator


You enter your current Balance & Interest Rate then your ERC and when it expires and whether you want to add the ERC to the mortgage.

Its a great little calc and I did it using an estimate of my ERC and the rate it said I needed to meet, matches with a deal my current providor offers so I will investigate further

[argentarius]

Re: Do you have a 'below base rate' mortgage ?

It's a nice calculator. It's a bit simplistic about the remortgaging costs, though, as it assumes £800 across the board. With a high valuation, that will not be enough for some lenders' valuation fees, plus legal costs, plus MEAF.

It also fails to point out that, if the deal you are switching to is for a shorter fixed term than the one you are switching from, you are increasing your level of risk as you are exposed to variable rates sooner; and it also fails to point out that if you are switching to a tracker, you are exposed straight away to the risk of rates increasing.

All in all, nice idea but very little in the way of adequate risk warnings and therefore not good for a lot of customers to use themselves.


As I've said in another post, though, most ERCs are way below the true cost to the lender of you exiting earlier, which means that in many cases it WILL be viable to remortgage to a cheaper fixed rate, over the same remaining fixed term, without any increased risk.

Bear in mind the rate your product reverts to at the end, though - many new ones will revert to a far worse rate than most old ones.