Tracker Vs. Fixed Rate With overpayments

Matticus

Hello,

I'm a first time buyer looking to purchase in the next 6 months or so and I'm looking into mortgages at the moment. Current wisdom seems to be pointing at a fixed rate for as long as possible given how low the base rate is. I'm a bit put off by the limits on overpayments though, I'm on a graduate scheme at the moment so have salary milestones over the next couple of years that will mean I should be able to afford to over pay and start reducing the debt.

Do you think its worth risking a tracker for the overpayment flexibility or would I be better off playing it safe and sticking the extra money in a high interest (oh that there were still such a thing) account and paying it off at a later date?

Thanks for any opinions!

Matt

hillcats

It really is a catch 22 situation and depends on your opinions and how much risk you can afford to take based on your income / if and when the rates rise etc.
Personally though I have had tracker mortgages for the last 8 years approx.

Gorgeous_George

I'd opt for a fixed rate - depending on the rates offered obviously (trackers can only track upwards and there is a risk that a Tory government might raise base rates before the recovery is secured).

You could always invest/save the 'overpayment' funds elsewhere - potentially at a similar of higher rate to your mortgage.

GG

Matticus

I notice in your sig the rate that your tracker is on.

Part of my concern is that current trackers are running at about base rate +4%
So if and when rates return to 5ish I'd be in quite a bad position. Of course as soon as the fix runs out I'd default to the banks SVR so perhaps its not that big of a problem?

Have to admit the security of knowing exactly how much the mortgage payment will be each month is quite attractive though!

Thanks for the replies!

getmore4less

One option to investigate is to split the borrowing over multiple rates part fixed, part tracker with more generous overpayments.

The down side is that the lender may want to charge multiple fees.

This ives you the security of fixed rate on the majority of the loan and the ability to overpay significant amounts.

Matticus

getmore4less wrote: »

One option to investigate is to split the borrowing over multiple rates part fixed, part tracker with more generous overpayments.

The down side is that the lender may want to charge multiple fees.

This ives you the security of fixed rate on the majority of the loan and the ability to overpay significant amounts.

This is an interesting idea, one I've never come across before, would a mortgage lender allow me in effect 2 mortgages of say £100,000 each, one fixed rate, one tracker? Seems like an ideal solution to me, has anyone tried this?

_Andy_

Yes that's doable although you may need to pay two booking fees.

dimbo61

Have you considered an offset fixed rate mortgage ?
YBS are doing some of the best deals at the moment ( check out first direct as well )
I have been on a fixed deal with them for the last 4 1/2 years.
Pay in as much as you like into offset account

VIGILANT22

Originally Posted by getmore4less
One option to investigate is to split the borrowing over multiple rates part fixed, part tracker with more generous overpayments.





Brilliance of the internet and those who think they are "mortgage advsisers"...:rotfl:

getmore4less

VIGILANT22 wrote: »

Originally Posted by getmore4less
One option to investigate is to split the borrowing over multiple rates part fixed, part tracker with more generous overpayments.

Brilliance of the internet and those who think they are "mortgage advsisers"...:rotfl:

When did lenders stop allowing this as an option?

Mine have all been happy to do this in the past mix any of the existing deals with the exception of offsets which must all borrowings must be part of the offset.

Most make you do this if you want to extend borrowings..

As I said they may want multiple fees.

VIGILANT22

getmore4less

FTB.......and yr suggestion.......:rotfl: