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  • FIRST POST
    • timcrouch
    • By timcrouch 22nd Sep 16, 6:42 PM
    • 7Posts
    • 3Thanks
    timcrouch
    How do I compare these two mortgages?
    • #1
    • 22nd Sep 16, 6:42 PM
    How do I compare these two mortgages? 22nd Sep 16 at 6:42 PM
    Hello

    I am trying to compare two mortgages and struggling so would appreciate any help.

    I have a tracker that is currently 1.74%

    I have the option to move to a 2 yr fixed at 1.24%, with a 1499 fee.

    My mortgage is 240,000.

    25 year term.

    I asked my adviser about comparing them and was told they're not really comparable. But I think there must be some way of doing this (e.g. do I save over two years if I move to the 2 yr fixed, accepting that after that two years I'd then move to a new one).

    Any help very much appreciated.

    Thanks in advance!
Page 1
    • Thrugelmir
    • By Thrugelmir 22nd Sep 16, 6:49 PM
    • 49,947 Posts
    • 41,612 Thanks
    Thrugelmir
    • #2
    • 22nd Sep 16, 6:49 PM
    • #2
    • 22nd Sep 16, 6:49 PM
    Is the 2 year fix with a new lender?

    How will you pay the product fee. Add it to the mortgage?
    A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against a rainy day.
    • Caladan
    • By Caladan 22nd Sep 16, 7:46 PM
    • 376 Posts
    • 193 Thanks
    Caladan
    • #3
    • 22nd Sep 16, 7:46 PM
    • #3
    • 22nd Sep 16, 7:46 PM
    For the immediate question (do you save over 2 years) check the following:

    If interest rates remain the same for the next 2 years, what will the total of the 24 payments be on both Mortgages? Then add the 1499 fee to the fixed rate payments. If the total on the tracker is lower than the total on the fix, then assuming nothing changes in base rate you're better on the tracker (and visa versa).

    However, there are all sorts of variables you can't account for, for example - If base rate comes down then the tracker could win out regardless of the above, and if after the 2 years of your fix there's no equivalent tracker available then in the long term you could be worse off either way.

    Basically your adviser is correct - It's impossible to compare directly. Nevertheless, they should be advising you, which means finding out about your personal circumstances and making a recommendation on it.

    Important to note: Your adviser cannot predict the future, but they can figure out what kind of risks you're willing to take with future interest rate movements.
    • amnblog
    • By amnblog 22nd Sep 16, 8:35 PM
    • 8,644 Posts
    • 3,235 Thanks
    amnblog
    • #4
    • 22nd Sep 16, 8:35 PM
    • #4
    • 22nd Sep 16, 8:35 PM
    As stated, your Adviser is correct.

    You cannot compare apples with oranges.

    The fixed rate gives you a defined result, the tracker rate may change, and if it does we won't know when and how - therefore we are trying to compare a certainty with an assumption.

    If it is important to know exactly how much you will pay, take the fixed rate.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • getmore4less
    • By getmore4less 22nd Sep 16, 11:56 PM
    • 25,594 Posts
    • 15,481 Thanks
    getmore4less
    • #5
    • 22nd Sep 16, 11:56 PM
    • #5
    • 22nd Sep 16, 11:56 PM
    Why do brokers just avoid doing the obvious?

    You can compare you just need to put in parameters and assumptions so you can analyse and make choices based on those.

    The obvious first comparison is to assume variable rates won't change.
    (which was the new norm till they went down)

    have a tracker that is currently 1.74%

    I have the option to move to a 2 yr fixed at 1.24%, with a 1499 fee.

    My mortgage is 240,000 25 year term


    @1.79% that's about 987pm

    You have 2 options for 2 years paying 987

    240000 @ 1.74% 224,506
    241499 @ 1.24% 223,588

    save about 900k after fees

    For the variable rate to break even you can do some "what if' on a rate change.

    today it would need to be 1.56% you can do the same for a change any time and also factor in rises

    Are rates going down, your call but probably not enough.....

    so the interesting part is what happens if rates go up and what happens after the 2 years.

    what's the follow on after the fix(might make that tracker look good) and what are your guesses at the fees.

    might you move and not b able to port...

    is that variable lifetime?

    Loads of variables longer term but some basic questions(like the one you asked) will this mortgage be cheaper over 2 years can be answered with some simple caveats.
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