5.29% Fixed or Tracker capped at 5.89%?

livalicious

Hi there,

We first time buyers, hoping to buy a property, maximum value of £217000, deposit of £37000, £180 000 mortgage, capital repayments over 25 years. I spoke to a broker earlier, and he suggested a tracker £3.39 over the base rate, capped at 5.89 for 3 years but only with a 2 year tie-in. The fee on that would be 1%, plus valuation and legal fees (which he wasnt able to give at the time, system issues). So a rough estimate, the fees all in would be about £2200.

A few weeks ago, I did my own search on comparison sites, and applied for a mortgage in principle with Nottingham BS, for a 3 year fixed at 5.29%, fees including valuation, legal, arrangement, etc totals just under £1200. (I did this to secure the rate, have a mortgage in principle ready to show vendors/estate agents we were serious about purchasing, and also because the broker told me before to come back when we had an offer accepted

So my question is, which one would be the better option. I know no-one can predict if interest rates would stay low or how long for etc. I just want to know how I could work out which one would be better over the 3 years. We were adamant that we would only go for a fixed rate just so we know what we paying each month, but the capped rate makes this a bit more attractive.

Any advice please?

kmmr

Who is the cap with?

livalicious

The broker didnt say, i did ask but he said something along the lines of "..im not sure, I would have to first make sure u fit the lending criteria and do some research first... yada yada..." Im guessing he couldnt or wouldnt say because I hadnt agreed to anything. I did tell him that I had the mortgage in principle with Notts BS, and his response was "..how did u manage that because that rate is exclusive with us.." Hmmm... He is with one of more well known brokers, not sure if im allowed to say who with on here?

kmmr

It's possibly this one: http://www.itlmortgages.com/339termtrackerwithcap.aspx

Never heard of ITL mortgages, but doesn't mean they aren't any good.

I would suggest you go for a fixed rate though at this stage, it feels like the rate rises will be sooner rather than later. The inflation figures are not coming down like the BoE expected, so they may be forced to do it.

Peelerfart

"it feels like the rate rises will be sooner rather than later"

the rises will come but no-one knows when. Of the two I would go for the capped tracker, if it wasn't for those fees.

Find out exactly how much the fees are. Until you know, you cannot decide

livalicious

kmmr - I dont think it would be with itl mortgages, the broker said the fee would be 1% of the mortgage, ltv 85% and would be capped for 3 years not term.

Peelerfart - we decided its best to stick with the fixed rate, we'd rather lose out on the possibility of saving than risk paying that much extra if rates did rise over 2% in the next 3 years, plus that 1% fee works out to £1800, £600 more than the fixed rate (and that includes valuation, booking, and legal fees).