Mortgage standard variable question

[4D]

When I have arranged a mortgage in the past for a house move I usually plumped for a tracker, with a couple of years tie in. I know that the base rate hasn't moved for some time; but with all the "product fees", ERC's etc. I wondered whether a standard variable is the way to go? I guess that they will have no tie ins and ERC's, you can get them without the product fee, so if the lender gives you a good rate initially but then decides to increase it you can just switch lenders? Any tips or suggestions from the experts on here?

[Berniman]

Over to you Samdy..

[4D]

Over to you Samdy..

 

[Samdy Gray]

I don't know why he didn't just PM me, considering I was the only one likely to give an answer.

If I'm reading this right, you're looking at going for a standard variable rate to avoid fees, but then jump onto a fixed/tracker rate (with tie-ins) once rates start climbing, thus incurring fees...

[4D]

Nope. Maybe go for a standard variable, but switch to another standard variable with a different lender if the rates get hiked.

* I didn't PM you because I thought others might be interested 

[Bewster]

I'm sure Sam will have his finger on the pulse more than me but you have raised a good point.

From my mortgage pricing days the reason why people chose SVR products over fixed and tracker was the complete flexibility they gave. Easy to over pay, no ERCs, tie ins etc but generally more expensive in the long term. However a lot of lenders had to introduce another SVR rate as the the one they had that was linked to base wasn't making enough money when the rates dropped.

I think you need to decide what suits you. Do you want a cheaper tracker with a bit of risk that the amount you pay goes up or the certainty of fixed although you'll end up paying a little more. A lot of lenders do switch and fix, you take out a tracker and can fix at a point in time if rates are looking like they may go up.

[Ardiles]

More fun this way.  I always like to stay abreast of 4D's latest lifestyle challenges.

Anyway, shouldn't this be in the '4D Q&A' section?

[Bewster]

More fun this way.  I always like to stay abreast of 4D's latest lifestyle challenges.

Anyway, shouldn't this be in the '4D Q&A' section?

Agree. And you'll always find out something new as well

[4D]

More fun this way.  I always like to stay abreast of 4D's latest lifestyle challenges.

Anyway, shouldn't this be in the '4D Q&A' section?

  Yep

[4D]

I'm sure Sam will have his finger on the pulse more than me but you have raised a good point.

I think I'll print this and frame it 

[Nemo]

If I may impinge on Samdy's patch (I did sell mortgages for a bit, albeit for Nationwide rather than independent)...

Most of the time, if you're getting a new mortgage you can't go straight onto the SVR and have to start with a 'product' rate. If you can though...

SVRs seem to operate like trackers for the most part, particularly Nationwide's which is capped 3% above the base rate (or used to be, apologies if I'm behind on that). As you might expect, it doesn't tend to be lower than that, unless banks engage in a rare bout of generosity, so what you actually have is a +3% tracker.

I remember when the BoE originally slashed rates by 1.5% that rule really fucked them over as I think it may even have been a 1% rule at the time, which meant that the BMR as it was then was literally the best product we had to offer and fixed rates were about 4% at the same time, plus a product fee (this was one of the worst days of my young career as we spent a whole afternoon having withdrawn from the mortgage market completely in abject and obvious panic)

Generally though, there's nothing terrible about SVRs but make sure you read what the conditions are- if there's no cap I'd be wary, but the flexibility is great if you're not losing out too much financially.

[4D]

A lot of these products are fixed for say 2 years,  then you have to revert to the svr.  I agree that a lot of mortgage offers seem to be discount,  tracker etc, but I have seen some svr offers at 2.5%  

[Samdy Gray]

SVRs are available, but they're 3%+ more expensive than the equivalent fixed rate or tracker. I see what you're thinking, but I personally can't see that there are any savings to be made by planning to switch if a lenders hikes their SVR. If one does, they all will.

There are fees-free fixed rate and tracker products available if that's really what you're trying to avoid. You pay a little more than the equivalent fee-charged product but it'll be cheaper than an SVR.

[Nemo]

Basically, if you think you'll need the flexibility a SVR offers then look at it.

If you aren't going to overpay dramatically, move or do anything unusual for the next 2+ years then it's just about doing the maths on what works out cheaper.

[4D]

The coventry appear to do a variable at 2.35%, granted there is a £999 fees to cover. Maximum LTV is 80%.