Decision...decisions...please VOTE: Long term fixed or low interest tracker?

Tunstallstoven

Hi all

My gf and I are first time buyers about to buy a house at the £160k mark. We have a deposit of £65k and so will be getting a mortgage of £95k.

In fact, we already have a mortgage approved on a 10 year fixed at 6.09%. The mortgage also allows unlimited overpayments - which is crucial for us because we plan to pay off the mortgage in ten years.

Looking online tonight I saw some trackers which allow unlimited overpayments with interest rates at around the 2.49% mark. That kind of figure is so tempting, but obviously comes with the risk of unknown future interest rates.

So with the unknown in mind, I'd love to see what people think we should do - play it safe with the fixed or take a risk with the tracker (and work extremely hard for the foreseeable future while interest rates are low, so as to take a big chunk off the top end of the capital).

(One thing worries me though - another thread I was reading about a N&P tracker where the BS are changing the terms and increasing the interest rate. I guess if I go tracker I'll have to triple read the small print)!!

Cheers

Max

Kavanne

Do you really want to be tied in to your property for 10 years?

I would go for a fix but looking at 5 yrs or less, imho.

Alisonb1975

Had this decision to mke myself recently. I chose a 4 year fix at 4.69. 10 years is a long time to fix for! Trackers are tempting but with a young family I like to have the security of a fix.

TrickyDicky

Id personally say go for the tracker and overpay as much as possible. When the rates go up too much, then remortgage. Hopefully by that time you'll have earned yourself around 50% LTV and able to get a very good rate.

As a quick point, the BOE base rate would need to go up to around 8% at the end of the 10 years for the fixed mortgage to be cheaper (thats assuming a steady climb over 10 years). because the money you save when the rates are lower than 4% balances out the money lost when the rates climb over 4%. Its unlikely to jump more than 0.25% a month, so you'll probably see a max of 3% change in a single year.

Dan_1976

As a first time buyer and a non married new couple, I would think before jumping in to anything longer than 2-3 years.

In most cases I found fixed suited first time buyers, they like the security and are normally on the edge of a budget. But rates are very low at the mo. Have a look at how much your mortgage will cost on a rate of 6-8%.

Anything can happen, a split, children, get married and more.

getmore4less

60% LTV you can get the best deals out there if salar stacks up.

Offset tracker over 10 years will almost certainly beat the 6.09% fixed rate

£95K @ 6.09% over 10y is £1059 pm

FD offset tracker £499 fee. 2.39%
£95499 @ 2.39% paying £1059

Paid off in 100 months (8y 4m) saving over £22k overall.

Do some "what ifs" on rates if they stay low you get ahead on the deal and they need to go up by 4% before you even have to think about losing out

You are ahead if rates stay low by
y1 £2900
y2 £6200

if rates then climb they would have to get to 8.2(a 6% rise) to be worse off over the 10y.

Peelerfart

Take the tracker and pay it as if it's at 5%.

Cannon_Fodder

The 10-yr is a little expensive. What rate can you get for 5-yrs?

Portable/low ERC, so you are not 'tied to the property'.

lisaann72red

Does anyone think it will get as high as 15% again?

Dan_1976

I would not have thought so, but then again they probably said that last time around.

Wutang_2

lisaann72red wrote: »

Does anyone think it will get as high as 15% again?

Absolutely definitely