Fixed vs Variable/Tracker

columbo360

Hi,
Myself and my partner are looking to buy our first house. We have approx £35k deposit and are looking around the £155k mark.

The advice from a mortgage advisor is to go fixed, as the base rate can't go much lower. My question is, would it be better to get a variable/fixed rate mortgage with no tie in, then switch to a fixed rate when interest rates look to increase? Or would it be better to get a long term deal on a fixed rate?

Any advice would be appreciated.

Thanks,
Matt.

udydudy

The call on interest rates is a tough one. IMHO Interest rates will stay at these levels for another 6-9 months max. and then start to rise. The problem will be that just before they start to rise the fixed rates would have risen in anticipation.My own mortgage initial period comes to an end in september and have either to move to standard variable rate or to a fixed rate.

Long term(5+ years) fixed rates seems to have moved up already with my lender. they were 4.99 late april/early may and hhave gone up by 0.5%.

I would rather go fixed as I am not expecting interest rates to go any lower but over the next 5 years they will surely go higher and a long term mortgage rate of 5% looks good to me. rathet than risk inflation going up and rates shooting through the roof.

With Crude prices already touching $66, even though it may come down to $50-$55, it is setting the base for higher crude prices in a years time. This will stoke inflation and the rise of interest rates.

ofcourse everything is not as simple as that but long term fixed rates atleast will give security and peace of mind as the difference between standard variable rates and fixed rates do not seem to be more than 0.5-1% with most lenders.

opinions4u

columbo360 wrote: »

Myself and my partner are looking to buy our first house. We have approx £35k deposit and are looking around the £155k mark.

The advice from a mortgage advisor is to go fixed, as the base rate can't go much lower. My question is, would it be better to get a variable/fixed rate mortgage with no tie in, then switch to a fixed rate when interest rates look to increase? Or would it be better to get a long term deal on a fixed rate?

Hi Matt.

Your question is a good one. The problem with it is that nobody really knows what the right answer is.

How much would it cost to get in to a low/no penalty tracker deal and how much will fixed rates be when you want to ditch it?

My gut instinct for a first time buyer mirrors that of your advsier - to fix (probably for 5 or 10 years, but that depends on a number of other factors that you can't really get in to on an internet forum).

But then there's Japan - where their economy overheated and rates have stayed low for a decade or longer. The comments in the first reply to your post have a lot of merit. But if the economy has higher taxes after the recession then those will help keep inflationary pressures under control, leaving the possibility of interest rates remaining low.

I don't know what you should do.

But I think whatever you choose to do, you should consider your fears, your future income potential (up as the career grows, down as babies arrive, inflation only pay rises), your future home owning plans (do you need portability etc?).

Then go with your gut reaction. And whatever happens later don't spend time regretting it. You make this decision for the right reasons. Don't beat yourself up with pointless hindsight if it turns out you paid a bit more over time because of it.