TRACKER 0.99 ABOVE BOE Vs 5 YEAR FIX?

RICARDO1234

Looking for some advice from you knowledgable chaps. We currently have a lifetime tracker at 0.99 above base rate with no early repayment fees.
We have the option to switch to a 5 year fix @ 3.99% or a 10 year fix at 4.98% (old HSBC product). The 5 year fix has a fee of £999 and the 10 year fix has a fee of £599.

Anyway we are not looking for people to tell us what to do but we know there are a lot of educated opinions out there that we would be interested to hear before deciding what to do.

At the moment we are thinking we will try to overpay each month as much as we can (unlimited overpayments) and wait and see what the market does to get the advantage of the low APR. But we are not sure if this tactic will be any good if rates shoot up and then we want to fix later at a higher rate.

What would you do if it was you?

Thanks in advance for your thoughts.

lakes_saver25

I work as a mortgage advisor and get this query a lot at the moment. In your situation I would stick with what you have got, but keep a close eye on the fixed rate mortgage products available. At a point where these start to rise - the decision needs made, wether to ditch and switch or stay put - you are in a good postion with not having a Early Repayment Charge period so you can jump to a fixed straight away. I hope this helps...

RICARDO1234

Thanks for your reply. The 2 fixed rate deals above are no longer available to new customers and if I want to take either one I have to do so in the next 2 weeks as the offer is only available for 4 weeks. It seems at the moment fixed rates are going up and there doesn't appear to be any on the market that match the ones offered. I am thinking that the base rate would have to increase quite a bit before I am making similar monthly payments to the current fixes. Having said that if we want to fix later on then we will probably pay more. I guess that's the gamble

MarkyMarkD

It's the usual gamble that affects fixed vs variable decision:

- if you choose a fix, at a level where you are comfortable with the payments, then you have certainty that you will likely be able to keep paying your mortgage whatever happens to rates;
- if you choose a variable rate which is currently lower, you may save money in the short term but you may not over the overall term, and equally well you may be left "high and dry" if variable rates fly upwards.

In the latter situation, you may be able to catch the fixes on the way up, but you will then likely be paying a higher rate for the fix for the remaining fixed rate period than if you had fixed now.

Fixing is just as much a gamble as staying variable - but the downside is loss of a bargain, rather than loss of your property if the variable rates go so high that you cannot meet the payments. That's why the vast majority of FTBs still opt for fixes.