Present Talking…

As endowments have lost credibility over the years more and more of us have reverted back to Repayment type mortgages.  When you paid Interest only and  could rely on your Endowment to pay off your mortgage capital  it was easy to switch lenders every 2 years or so, because the mortgage term had no effect on your payments.  But many people and many brokers seem to have forgotten that changing lenders with a Repayment mortgage is a different thing all together.

Repayment mortgages - mean that you pay a portion of capital and interest every month.  in the early years of a mortgage you pay almost exclusively interest.  If you chop and change lenders by remortgaging every 2 or 3 years the capital has no real time to really reduce.  But of course you still need another 25 year or more mortgage to keep the new repayments at a comparable level  to your old mortgage.  So the idea you had of having a mortgage and being mortgage free in X years rolls on and on the more you remortgage.

So if one couples these two arguments together we start to see the sense of fixing and we start to see the sense in fixing over a longer period.  So is the goverments idea of promoting longer fixed rates actually perfectly sensible and can really work to ones advantage?

A testionial - my own parents took a lifetime fixed rate at 3.85% over25 years back in 1956 - were mortgage free by the time they were 50. Ok they haven’t moved house but pretty much all mortgages are portable to new properties these days if you do decide to move.  How sensible does that strategy look today!