First time buyers, 5 yr fixed or 2 yr tracker??

shamo

Hi all,
first of all thanks for peering into our dilemma. We are buying our first home with sale agreed at 267500. We have a 25% deposit (67000) Our lovely mortgage advisor (independent) has fished out the following deals:
2 yr tracker at 2.85% £1000 set up.
Fixed 4yr at 4.99% no set up free survey and £250 cash back.
Fixed 5 yr at 4.54% with £2000 set up fee.

I am fairly certain interest rates will be higher in 5 years time but the difference in monthly payments between the 2 yr tracker and 5 year fixed is £200!
I'm no Goodwill Hunting so could use some guidance. many thanks.

VIGILANT22

I just cant believe you use an advisor, they complete a fact find have a lengthy discussion with you.....then end up giving you 3 products to choose from?...Are you sure yr receiving advise and not just information only service. An adviser is supposed to assess/determine yr risk profile and advise accordingly not give you a heap of quotes!

shamo

Ok thanks for that. I guess she filtered out the unsuitable mortgages and presented us with a choice based on best value and our situation, that being fixed rate or tracker as described above. Ultimately it would be our choice so not sure she has failed in her remit otherwise she would simply have printed off the 250 mortgages we currently qualify for. I was simply asking what the forums opinion on the products mentioned was, but thanks for your help.

VIGILANT22

Well for a start you wouldnt have had 250 to chose from in todays market..

However, someone who is cautious would go for a fixed...if they wanted a bit more risk it would be tracker....just cant understand why an adviser doesnt advise...

shamo

I understand your point but all I'm doing is garnering opinion on 5 yr fixed and 2 yr trackers, not the merits or otherwise of our mortgage advisor. Perhaps she's not an advisor? we don't pay her, she seeks commission from the loan provider. Thanks again for your input.

getmore4less

What are the follow on rates especialy the 2y tracker.

If it higher then I think you could do better with 75%LTV if the salary stacks up.

shamo

The mortgage advisor is emailing the small print in the morning, I'll quiz her about 75% LTV, we are a cpl with combined income of 50k. Thanks for your reply, was beginning to think only Vigilant22 had an opinion.

VIGILANT22

why are you so touchy, just 'cause i expressed an opinion?

madeupname1

shamo wrote: »

Hi all,
first of all thanks for peering into our dilemma. We are buying our first home with sale agreed at 267500. We have a 25% deposit (67000) Our lovely mortgage advisor (independent) has fished out the following deals:
2 yr tracker at 2.85% £1000 set up.
Fixed 4yr at 4.99% no set up free survey and £250 cash back.
Fixed 5 yr at 4.54% with £2000 set up fee.

I am fairly certain interest rates will be higher in 5 years time but the difference in monthly payments between the 2 yr tracker and 5 year fixed is £200!
I'm no Goodwill Hunting so could use some guidance. many thanks.

Well done on saving up such a sizeable deposit! :beer: Since you ask for opinions (and don't seem to be looking for any particular expertise) I thought I would give you mine. When I was a first time buyer, I liked the certainty of knowing how much I would have to pay every month whilst I was getting used to the business of trying to figure how much it would cost to run the home, paying for furnishing it, etc etc. Therefore, I quite like the sound of one of the fixed rates you've listed. Of course it was at a time when mortgages were easier to come by and the fixed rate deals was better than the SVRs. One thing seems pretty certain and that is interest rates will be going up at some point and so the £200 per month difference will at some point shrink and (in my view) is likely disappear over the lifetime of a longer fixed rate.

RX-78

madeupname1 wrote: »

One thing seems pretty certain and that is interest rates will be going up at some point and so the £200 per month difference will at some point shrink and (in my view) is likely disappear over the lifetime of a longer fixed rate.

I think that is a very good point! But the other question is if the interest rate will go up enough for the OP to end up with higher fix rate in 2 years time? i.e. if she takes out 2 year tracker now, will she get fix rate deal thats comparable to what she is being offered now? That all depends on how much the interest rate will go up in the next 2 years I suppose. Personally I dont think it will go up by much, given the state of the economy & proposed increase in tax and public sector spending (which ever party wins).

I doubt anyone can predict the future, so I suppose it all boils down to if you can pay still pay the mortgage in the worse case scenario (say if base interest rate goes to 10%).

shamo

Some great points that give me some more to think about, thanks everyone so far.:money: