End of Mortgage fixed rate query? and Negative Equity

DustyMan

Hi all,

Just a couple of queries and excuse my ignorance on these matters.

I have a Mortgage with KBC HL on APR 5.37 fixed for 3 years. This 3 years is up in Janurary of next year. It states in the 'Loan General Conditions' that "At the expiry of the fixed rate period the intrest rate shall be no more than 1.25% above the prevailing European Central Bank Main Refinancing Operations Minimum Rate for the remaining term of the loan". Does this mean I will be offered a Tracker Mortgage or does such a thing exist any more?! Will KBC HL offer me a fixed or variable rate or will they just decide themselves and tell me I have no choice? I'm not sure?
Also I had to take a period of c. 10 months 'intrest only' during the 3 years will this be added to the 3 yr fixed term, i.e 3 yr's and 10 months and then the change from fixed can start?? Or will it just change at the end of the 3 years irrespective of the intrest only break.

Also, if I decided to rent the property in the neat future or sometime in the future what potential changes could occur re my Mortgage?

Any advice would be greatly appreciated. Thank you in advance for your replies.

Senna

From the sounds of it you are entitled to move to an tracker rate of ECB+1.25%, which in the current market is great. Its very important that you dont lose this rate, if at the end of your current fixed rate, you decide to take another fixed rate or even opt to go on SVR (you wont) you will lose your tracker.
The fact you when on IO for 10 months should not make any difference, but at that time, did you sign anything? do you have a copy of that?
The most important thing is that you take up you tracker rate at the end of your current fixed rate, dont let them talk you out of it.

The_Conductor

There might be an issue here.
The MRO (Main Refinancing Operations) rate set by the ECB is composed of two pillars, a fixed rate and a variable rate. The fixed rate (marginal lending facility) is currently @ 1.75% (its been at this level since May'09), however the last variable rate tenders the ECB issued (July 2008) had an MLF of 5.25% .

It is currently proposed to wean banks off overnight lending from the ECB, by forcing them to recapitalise on the open market by the end of the year- and cancelling the fixed rate tenders (variable rates would then presumably creep up to reflect supply and demand, depending on what volume of funds the ECB was willing to release to the market- and their stated aim is to withdraw funds from the market- not add further funds).

The last variable rate tenders the ECB held, had a stated cost of 5.25%- adding a 1.25% margin to this results in a mortgage rate of 6.5%

This is purely hypothetical- as the variable rate tender will depend entirely on what level of funds are available from the ECB- but you have to keep in mind that they are removing funds from the market........

Do not automatically assume that '1.25% above the prevailing European Central Bank Main Refinancing Operations Minimum Rate' will equal 1% + 1.25% = 2.25% come January- esp. when the stated aim is to remove the fixed rate tenders and overnight lending facilities from commercial institutions.

You really need to talk to an independent financial advisor about what your options are ASAP......

am i bovvered

be careful, if you do get the +1,25 tracker you may make it invalid by renting out the property.