HSBC 1.99% 5yr fixed - change or not

No-one can tell you what to do because no-one knows what interest rates will do.

How long will it take for the £1,500 to be worth it, if interest rates rise?

Use this page: http://www.theguardian.com/money/mortgage-calculator

If I assume your mortgage is £320k over 20 years (total guesses), your current repayments with your 1.99% tracker mortgage are £1,617. They'd be the same initially on the fix.

If they increase the rate once (by 0.25%) your repayment goes up to £1,655, or £38 per month. It would take 3.5 years for you to recoup the £1,500 arrangement fee. Half that if the base rate increases by 0.5%.

It's simply a gamble, and you make your choice based on your guess about where interest rates will go. In five years time, whichever option you choose, you may be better or worse off, financially.

The biggest question may be how comfortable you are with your current repayments and how scared you are of them increasing. You might want to switch for the certainty.

For what it's worth, we're on the same HSBC lifetime tracker as you and we're not going to fix. I take low fixed rates as an indication that the economists who work at HSBC don't think interest rates are going to increase much anytime soon. But our monthly budget is pretty relaxed - we can easily afford it if rates increase - so we can be relaxed about it.

After the 5 years are up, the £1500 'insurance' will have lapsed and you may be in a worse (or better, but less likely) position with the interest rate.

I would stick with the tracker and if you have the £1500 available for the arrangement fee, put it aside and collect the 2/3%+ interest on it.

I have the same 1.49%+BOE tracker with HSBC and intend to stick with it.

pinkdalek wrote: »

Look at offers with no arrangement fee. The interest rate may be higher but only slightly.
You don't save a great deal in money over the term of the deal by paying this high fee!

0.5% of £300,000 is £1,500 so if such a mortgage holder is saving 0.5% per year over a 5 year term, then there's a significant saving to be gained by paying the high fee. Even 0.2% - 0.3% lower rates would make the high fee worthwhile.

I do agree that it gets less worthwhile with lower mortgage amounts but, at £300,000 a high fee with a low rate will almost always beat no fee with a higher rate.