First Time Buyer - Fixed or Variable?

TiaStar

I am a first time buyer and hopefully going to be looking at houses below £175,000. I am unsure as to whether I should look at fixed or variable / tracker mortgages. I will have a 20% deposit available. My initial searches have shown differences in monthly payments of £200. Not sure if the security of a fixed is worthwhile at the moment. Is anyone else facing any similar dilemas?

iscrimger

It depends on what you can afford. Lenders seem to be using a variable rate of BOE Base Rate + (around) 3.5%.

Eventually the Bank of England will start increasing rates - no-one knows how quickly rates will go back up or if they will get back to what they were pre-recession. There were over 5% before there recession so could you afford 8%+ in a year?

You could always use the lower rate now to put away some extra cash for when the rates increase to allow you to look at alternative deals when things get tighter?

If you choose a fixed rate they're starting around 4.49%-5% so there really isn't much of a difference once the rates start to increase. I personally am looking at a mortgage fixed for 2 years at around 4.59%. You'd only need a BOE rate increase of just over 1% and you'd be losing out.