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Choosing between two similar looking discounted mortgages

Hi folks,

I would appreciate some advice and help in choosing between what seem like 2 mortgages with similar features and costs from the same lender.

Having considered my circumstances and requirements I have narrowed done my search (for a better remortgage deal) to the following two deals, both from the Woolwich. (These were based on a search of the excellent Charcol Online website. I have also searched the moneyfacts.co.uk website)

My time horizon is two years after which I plan to review and remortgage again if required. My key requirement is not to have any early redemption penalties whatsoever nor any tie ins.

Product A. Discounted Variable Mortgage - 2.25% off the Woolwich SVR (Standard Variable Rate) for 2 years Current Woolwich SVR is 5.54%. Therefore current mortgage rate is 3.29% Initial Setup fees (Valuation; Application; Legal etc.) = approx £750 Total cost of mortgage over 2 years at current rates: approx £12,600

Product B.Discounted Tracker Mortgage; Barclays Bank Base Rate + 1.5% for life of the mortgage, with a discount of 1.7% for the first 2 years.(Note: This tracks the Barclays Base Rate and *not* the Bank of England Base Rate). With the current Barclays Bank base rate of 3.5%, the current mortgage rate works out to 3.30% Initial Setup fees (Valuation; Application; Legal etc.) = approx £1000 Total cost of mortgage over 2 years at current rates: approx £12,900

Both the above have no tie ins whatsoever nor any early redemption charges.

As I see it, the key difference seems to be that 'A' is sort of 'tracking' the SVR and 'B' the Base Rate.

Current Base Rate is 3.5% and the Woolwich SVR is 5.54%. So the current SVR 'differential' is 2.04%

So the key question is: Will the Woolwich SVR 'differential' (i.e. the difference between the SVR and the base rate) increase or reduce, assuming the base rates increase in the future ? Any views/comments on what the general industry behaviour is likely to be in this regard ?

Having looked at the previous history of Base rates and SVRs it seems that as interest rates increase, the SVR 'differential' goes down. As such it seems that mortgage 'A' would be a better bet.

Have I missed something obvious in my above analysis ?

I appreciate that past history is no guarantee of future behaviour but I would appreciate views as to whether both are equally good or whether one is more preferable to the other. (I am happy to fork out the extra £250 now if 'B' is considered a better option.)

Any advice/views/comments/suggestions gratefully received.

If you prefer, please reply directly via email to adam_111 snipped-for-privacy@yahoo.co.uk

Many thanks, Adam

Reply to
Adam
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As with all financial products you need to consider all of the options.

I would not use the woolwich at all , ever suggest you use a lender that has a history of a competitive base rate, which often means the 'initial deal' is not as good, but the ongoing rate is better. This favours lenders like the Nationwide and Standard Life bank amongst others.

Also to compare lenders based on 'total amount' payable for a given period of time, this is the only true comparison because APR's can be doctored.

Suggest you take advice, and pay for it if required, it will be worth it on the long run

Richard

Reply to
Richard Smith

He's not doing it for the long run though, just for two years. FWIW I agree about Woolwich, what you gain in savings will easily be cancelled out in extra aggravation caused by their astonishingly incompetent staff and procedures.

Reply to
Tumbleweed

Folks,

Thanks for your responses.

My key objectives are minimising the total cost of the mortgage over the next 2 years and not having any early redemption penalties or any tie-ins.

I have searched the John Charcol (Marketplace) and moneysupermarket.com websites. Are there any other 'biggies' which I should check ? I have also spoken to a large mortgage broker.

I appreciate your views on Woolwich's inefficiencies. However I have dealt with them in a previous remortgage and dont mind the extra hassle again this time as the total cost difference over 2 years between the above 2 Woolwich mortgage options and the best offered by any other organisation (for the above objectives) is more than £1500.

The key question to which I am seeking views on is: Is the SVR less

2.25% discount deal preferable to the Barclays Base Rate less 1.70% discount deal ? Assuming these were the only the 2 deals available on the planet which one is preferable ?

Cheers, Adam.

Reply to
Adam

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