Fixed re tracker

Onawingandaprayer

My son - first time buyer - has come to me for some advice and I don't feel knowledgeable enough to help him.

The question is Fixed v Tracker (which I know from trawling thru the forum has been asked many, many times before.)

He's been offered two deals:

1. A two year Fixed Rate of 5.99%
2. A 3 year Tracker, at a variable rate which is 3.99% above the Barclays Bank Base Rate.

Both from the Woolwich.

Any helpful thoughts out there?

_Andy_

He really needs to decide whether he needs stability.
With option '2' he needs to work out if he can take the hit when base rates rise - yes it might be affordable now but what if the base rate was 1,2,3,4,5+ % higher?
Also with the fixed rate, would it not be more economical to fix for a longer period than two years?

My personal thoughts are fixed are generally more appropriate for FTBs due to them going through a period of adjusting to owning a home for the first time, being able to budget properly etc.

dimbo61

Can your son see what sort of deals he could get for a 3 or even a 5 year fix then he has long term security and knows what his mortgage costs are for the first (expensive ) few years of buying a property and he will by then have cleared some of the debt and increased his equity

space_rider

I wouldn`t want to go for a tracker of 3.99 above base rate. The only where left for rates to go is up and alot can change rate wise in 3 years.

Peelerfart

I think he perhaps needs to cast a net wider than just the Woolwich.
The tracker is the Barclays rate and not the Bank of England rate

Gorgeous_George

Onawingandaprayer wrote: »

My son - first time buyer - has come to me for some advice and I don't feel knowledgeable enough to help him.

The question is Fixed v Tracker (which I know from trawling thru the forum has been asked many, many times before.)

He's been offered two deals:

1. A two year Fixed Rate of 5.99%
2. A 3 year Tracker, at a variable rate which is 3.99% above the Barclays Bank Base Rate.

Both from the Woolwich.

Any helpful thoughts out there?

A two year fix is pointless. It only provides security over a period when rates are unlikely to rise (much).

3.99% over base rate is rubbish. When rates rise you will pay more and they cannot fall (much).

There needs to be more options for me to offer advice!

He should be asking for advice on whether to buy or not. My advice would be to wait a while.

GG

mrpang0

I am in a similar position!

How much deposit has your son got available? My wife and I are lucky enough to have 25% ready - so the Abbey 4.99 fixed for 10 years option is very, very appealing.

RufusA

What happens to the "2 year fixed" at the end of the fixed rate period?

When I was looking last, Woolwich had some quite attractive short term fixes. The fixed rates weren't that competitve but at the end of the period they reverted to a nice BBR+1.49% tracker.

Personally I'd much prefer to fix for a short term and get a low(ish) cost tracker at the end, then go for an expensive tracker to start with.

BBR + 1.49% vs BBR+3.99% is a no brainer IMHO!

I would suggest he speak to a whole of market IFA, as fixed vs tracker decision has a lot more to do with affordability / risk / personal circumstances than a simple question of which should work out cheaper.

For some it's better to fix long term on an "expensive" product that you know you can afford, then risk not being able to make the mortgage payments three years hence when interest rates rise.

For others fixing can be wrong. You don't want to be stuck with an inflexible 10 year fix on a studio flat with a heavily pregnant wife for example!

HTH - Rufus.