Fixed rate or tracker?

VKay

Am a first time buyer and have had offer accepted with partner on house for £140000. We have a deposit of 40k. So not a massive mortgage but should we fix- how long? or should we go for a tracker and then swop to fixed when the rates increase/ What advice can you offer? Have an IFA but shes talking about 30/35 year terms and feel this is not the best advice for us so a bit sceptical about her advice never to fix for more than two years... Surely times are really different at the moment??? Help!

trynsave

Whilst your IFA is there to offer wisdom, always go with your gut instinct!

2 years fly by, and before you know it you'll be hunting down the next mtge deal. This is ok if you know that you will, bad if you just let your mtge slip onto the svr!

Also balance the costs involved in frequently moving lender. Valuation fees, exit fees, booking fees etc., etc, etc., against a higher rate.

Also weigh up security against flexibility.

Personally I opted for a 5yr fxd when trying for a baby. Knew we'd drop an income so wanted to be sure that we could cover payments until baby off to school. Gave us breathing space and reassurance - something we felt was worth the price!

VKay

Thanks for your reply. Looking at RBS fixed rates- they look good. I thought RBS was in trouble- would it be daft to get a mortgage with them at the moment??

caracal_77

VKay wrote: »

Thanks for your reply. Looking at RBS fixed rates- they look good. I thought RBS was in trouble- would it be daft to get a mortgage with them at the moment??

My opinion is that it's pretty safe going with RBS (if terms suggests it's the best option for you). Don't see RBS allowed to go under.

VfM4meplse

Fixing at the start of a mortgage is often a good idea as there are always additional costs and it is helpful to know what needs to be paid on a monthly basis with no surprises. Some products are flexible enough to let you pay more off w/o incurring a penalty. Up until 18 months ago I might have agreed with your IFA about 2 years but rates are very low at the moment and if you plan to stay in this property for a certain length of time (eg 5 years) then fix it to match. This will also help you ride out any negative equity and as interst rates rise any savings will also benefit from increased interest rates.

Go for a long overall term as suggested to keep the monthly payments as low as possible and when your finances look a bit rosier and this recession is a thing of the past switch to an offset and pay the outstanding balance off quickly.