Please help me decide between tracker mortgage and fixed rate

ItsMe

My current 2 yr 5.44% fixed rate mortgage is due to finish in May but my lender has offered me the option of changing now with no early repayment fees. The two best deals with no fees attached seem to be a 2 yr tracker at 2.49% above base rate i.e. currently 2.99% or a 2 yr fixed at 3.89%. Both will bring my monthly payments down considerably from what I'm paying now which is great but the monthly payment difference between the two is £65 at current rates which is worth having. Obviously I'm better off with the tracker until the base rate rises 1% and I know noone knows if that might happen within the next two years but it seems likely to me it will it just depends when and then of course if it goes higher I'll be worse off if I choose the tracker over the fixed rate.

Can anyone advise or just say which they'd go for. I have to switch before end Jan or offer expires so basically I have to do it tomorrow!

Thanks.

mac24

Tracker

Blimey.Dejavu or what.Have been mulling over the exact same problem with which appears to be the exact same rates.Abbey/santander right? I've gone for the 2 year tracker.Way i see it is that rates will stay lower than my previous 5 year fix rate for some time (fingers crossed!).I intend to put all the money i save from the rate difference during the two years in a savings account and re-use it if rates start to get out of hand.If they don't ,then happy days.All the saved money goes into an overpayment.

ItsMe

Yes, it is with Abbey/Santander. It's a really tricky one to call because the rates are so close. The only sureity is the tracker rate won't go down! The million dollar question is how much could it go up by! I wish there was a capped tracker option.

getmore4less

What does the existing deal change to in May?

Thats the base for any comparisons.


There are cases of lenders duping people to change then not checking they allredy have a great follow on tracker rate better then the new deals on offer.

redpete

With that choice I would probably go for the fix - but I'm not in your position and don't know what other debts you might have, what other commitments, what spare cash you have, if the mortgage has flexible payments or if you could use them, how open to risk you are...

ItsMe

Unless I choose a new deal it will just go to the variable rate which currently is 4.24% but no knowing what it will be in May. But if I switch today to the tracker my payments will be £179 a month less than they are now and £114 less with the fixed rate which is why I don't want to wait until May.

opinions4u

Are there any product fees?

What will the SVR be if you do nothing at all? (answered as 4.24%)

How much do you actually owe (and is there any equity in the property)?

Without more information nobody can vote from a helpful position. They're just guessing or making a range of assumptions which won't help anybody.

CloudCuckooLand

Any longer Fixes being offered ?

dimbo61

Me ! I would take the 2 year fix and keep my mortgage payment static
That way I would have paid an extra £2,500 off the mortgage in 2 years and be paying the same mortgage payment as I have for the last 2 years.
Only do this if you have no other expensive debt and an emergency fund of 3/6 months of income GOOD LUCK

Pincher

Standing back a bit, is this hasty deal because Santander reports their profits in EURO? Assuming they expect EURO is about to fall, significantly, and will stay low for two years against sterling, it makes sense for them to fund sterling mortgages using EURO. The repayment cash flow over the next two years will be worth more and more, in EURO terms.
When you go onto SVR after the two year deal, they can fund it from LIBOR money, freeing the sterling. If the EURO is still low, they make more profit on the exchange rate.

All this depends on converting the EUROs before the big fall, hence the haste, and the tempting offer (no ERC, no fee, decent rate). So either deal is good value. If you need to fix for security, fix: personally I would gamble and go for Tracker.

On the other hand, the adventurous could get a mutli-currency mortgage in EUROs, and switch back to sterling after the fall.

Gorgeous_George

I would not choose a two year deal.

However, of the two options quoted I'd choose the tracker. Why? Because it is cheaper considering what we know at the moment. Even if the Tories win the May election it is inconceivable that base rates will rise over the next year or two.

I'd be looking to fix for at least five and preferably 10 years.

GG