Fixed or tracker? help!

katanne21

I am in the process of buying my first place and i'm confused as to whether to go for a fixed rate or a tracker. I am curently chosing between the co-op tracker for 3 yrs at 2.39% and co-op fixed 5yr at 4.99% I know that interest rates can only rise but I want some opinions as to whether they would rise enough over the 3yrs to make the tracker to much of a risk? any help would be great! thanks.

Peelerfart

5 year fix would get my vote. Interest rates would only have to go up 2% to equal things out and I think rates will go up more than that over the next three years.

PF

Mrs_Bumble

I agree with Peelerfart above, unless you are planning to move within the 5 year period of time. The 5 year fixed will give you a clear budget and you will know where you are each month.

If you took the tracker does your household budget have enough disposable income to go with potential rises?

Have a look at what the bank of england base rate has been at historically:

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx

katanne21

Thank you for you quick responses!Very helpful. I just wonderd if i go for fixed then is it better for me to go for the 3yr 4.39% with the natwest or the 5yr 4.99% with the co-op?

getmore4less

katanne21 wrote: »

I am in the process of buying my first place and i'm confused as to whether to go for a fixed rate or a tracker. I am curently chosing between the co-op tracker for 3 yrs at 2.39% and co-op fixed 5yr at 4.99% I know that interest rates can only rise but I want some opinions as to whether they would rise enough over the 3yrs to make the tracker to much of a risk? any help would be great! thanks.

What does the tracker rate change to in 3 years?
What does the fix change to in 5years
What is the LTV

With a high LTV the follow on rates(base + ot SVR or some other) are an important part of the desition process.

If you plan to pay the same as if you got the 5 year fix then while the tracker stays low you build up overpayments that will buffer the increases if they come, this means the rates have to go up moret han just the difference to be worse off at the end of 5years.

tek-monkey

I was in the same boat, but went on the side of extreme caution with a 10 year fixed at 5.29%. I want to know exactly what I'm paying out, and as this is still cheaper than my rent by about 20% I can put the extra into overpayments. I may be paying more than I need to, but it means I don't have to care about interest rates for a long time!

I know if I need to move I may have problems, but I can't see it happening. Got a secure job where I will move up salary bands every year so hopefully I've done the right thing. Only time will tell.