Fixed or Tracker for First Time Buyer

terry.h

I am about to purchase a house with my girlfriend as first time buyers, and would like some advice as to whether to go with tracker or fixed.

Natwest have given us the following options for a mortgage...

£748.55 for a 5 year fixed rate
£634.67 for a 2 year tracker

Which would think is best for us to go for?

Cannon_Fodder

Fixed......

AngelsMadv

As a FTB I'd definitely go with the FR. It gives you stability for the next 5 years where you know exactly where and when your money's going to.

For a starters the tracker you've quoted doesn't seem to be that good over the FR anyway. No one can predict the way the prices are going as we'd be millionaires if we could but you have to weigh up the extra the tracker would save you vs the peace of mind the fixed will give you.

Best of luck in your new venture.

_Andy_

You havent stated the rates or fees applicable.

The tracker may look attractive but will you be able to afford the payments when rates go up?
How important is stability to you?

terry.h

Thanks for the prompt replies...

My one concern was what will happen at the end of the initial period.

At the end of the 2 years it will switch to variable, and (no doubt) will start to rise over the next x number of years. This means it may go up a bit every few months, however...

With the fixed rate, it switches to variable after 5 years, is there a risk this could make the payments jump up quite a lot?

Thanks again in advance.

Peelerfart

"is there a risk this could make the payments jump up quite a lot? "

That's always a risk but after 5 years of stability you may be in a better place, financially.

P.S. I'd go fixed by the way

terry.h

_Andy_ wrote: »

You havent stated the rates or fees applicable.

The tracker may look attractive but will you be able to afford the payments when rates go up?
How important is stability to you?

There are no fees, the tracker is 4.69% and the fixed is 6.39%.

Stability is not a major issue, we can afford quite a bit above the current tracker payments, however we do not want to choose a tracker and in a couple of years find we are paying £800+ when we could be paying much less has we chosen the fixed.

Likewise we don't want to go with the fixed and then find that interest rates don't move for the next few years.

I know no one can guess what interest rates will do, however based on predictions I am after saving money in the long term.

Thrugelmir

terry.h wrote: »

I know no one can guess what interest rates will do, however based on predictions I am after saving money in the long term.

The only guaranteed way of saving money is to overpay your mortgage. For many the fact that the benefits don't materialise for 20 years takes this idea off the radar.

However if this is what you want to do. Take the tracker and overpay as much as you can sensibly afford. By making inroads into the capital debt early it will knock years off your mortgage by the end. Also increasing the LTV sooner will give you access to better rates earlier in the future.

By reducing the capital balance owed it also reduces the amount your mortgage will rise in the future as well. As when interest rates do change, your mortgage will be recalculated on the balance owing at that point in time over the remaining term.

WTTM

As you cannot predict the future BR, any option you take is a risk.

I have always gone VR discount or tracker for 10 years (apart from 2 years offset) and been happy.


MOMENT