Clive Kornitzer, chief operating officer at Abbey for Intermediaries.
By moving away from a fixed rate mortgage to a tracker, Anthony is hedging his bets on interest rates going down over the next couple of years, but there can be no guarantee this will happen.
Abbey’s 'fix and flex' mortgage might help give Anthony the best of both worlds. The deal has the benefits of a flexible mortgage, plus the added bonus of being able to fix for six to twelve months at a rate of 6.09 per cent. This would give Anthony some certainty in the short term to see how the market plays out first.
Anthony can also use his bonus to greater effect by using the flexi mortgage to offset his savings against the mortgage or by making overpayments to reduce his monthly payments. Finally, if Anthony is still worried about the outlook for the City, he has the assurance that the fix and flex mortgage allows him to make underpayments and take payment holidays should he need.
Ian Fitzgerald of Thinc Group Ltd
Anthony has clear views, but the first thing to point out is that there is no guarantee interest rates will fall. Anthony will firstly need to seek a qualified opinion on whether his needs will be best served by paying all or some of his bonus towards reducing his mortgage or whether there may be benefits to investing his capital over the short, medium or even longer term.
An IFA who provides mortgage and investment advice would be ideally qualified to cover all aspects of his requirements. Clearly Anthony would lose the flexibility to cover bad times in the City if he committed the whole bonus to repaying his mortgage or investing it where he has no access. Anthony’s adviser would need to ensure that account is taken of all his requirements. If Anthony chooses an adviser who specialises in mortgages only, it is imperative that he also seeks investment advice from a qualified adviser.
David Watson, consultant, Savills Private Finance
Anthony could consider a flexible mortgage with the likes of Bank of Scotland, Alliance & Leicester or The One Account. This would enable him to pay down his mortgage using his bonus and draw the money back at the same margin above/below the Base Rate as the main mortgage as, and when, he needs to.
Alternatively, he could opt for an offset with the likes of Intelligent Finance or Standard Life Bank. This would enable him to offset his bonus against his mortgage debt; depending on how he set this up he would pay interest only on the overall net mortgage, while retaining access to his savings in case of an emergency.
A flexible mortgage typically costs more than an offset so the latter is likely to be best for Anthony, but to make a specific recommendation I would need to ask the client some further questions.
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