Need advice Tracker or Fixed rate

thecrater

Hi First time buyer here.

I'm torn between two offers one is fixed rate and one is tracker but i'm not sure which one to go for.

Fixed rate
4.25% on a 3 year fixed rate with £1000 arrangement and booking fees

Tracker rate
3.09% for 3 years no additional costs (2.59% above base rate)

If the interest rate remains constant for 3 years which is very unlikely as inflation is soaring high then I'm quids in.

I don't know what the speculations are with regards to the Bank of England base rates. I mean how much is it likely to go up by in 3 years? based on the current economic situation and recovery expectations.

Any advice would be greatly appreciated.

Cheers guys. Just edited the post to add the following:

LTV 75%
The offers are through two whole of market brokers
No kids
25% deposit
It's 2.59% above base rate for 3 years only after that it's SVR and no exit fees (after 3 years)

dimbo61

We cant give ADVICE on here thats something you get from a "whole of market broker " who has done a full run down of all your income and how you run your life!
By that I mean how much you earn, deposit,kids!,property,LTV and lots of other things.
Now the BOE base rate has been 0.5% for 14 months and the only way is up
Why take a fix for just 3 years? Why noy 5/7/10!
Can you afford to overpay every month?
Have you considered offset ?
How much spare money have you got every month ( if rates went up to say 5%/6%)

MacsReturns

Hi & welcome to the board.

What rates does each have after the three year period? Do you mean the tracker will remain at base + 2.59% for the full term? What exit fees would you face if you decided to remortgage after three years? I assume on the fixed rate deal, it will return to the provider's SVR - do you have the figures on that & how it compares to your 'variable' offer? If that's similar to base + 2.59%, and you think base rate may stay low for three years, then you'd be better off on the variable offer from the start. It really does all boil down to what rates do in the future though... but that is anyone's guess, imagine in May 2007, would anyone have been able to predict today's base rates?

Personally, I'd reach for Excel and spreadsheet it, and see how different scenarios play out, then try and decide which scenario is most likely to happen. But I'm bit of a geek like that

thecrater

MacsReturns wrote: »

Hi & welcome to the board.

What rates does each have after the three year period? Do you mean the tracker will remain at base + 2.59% for the full term? What exit fees would you face if you decided to remortgage after three years? I assume on the fixed rate deal, it will return to the provider's SVR - do you have the figures on that & how it compares to your 'variable' offer? If that's similar to base + 2.59%, and you think base rate may stay low for three years, then you'd be better off on the variable offer from the start. It really does all boil down to what rates do in the future though... but that is anyone's guess, imagine in May 2007, would anyone have been able to predict today's base rates?

Personally, I'd reach for Excel and spreadsheet it, and see how different scenarios play out, then try and decide which scenario is most likely to happen. But I'm bit of a geek like that

Hi,
isn't the SVR variable? on the fixed rate one it's 4.74% but that could change by the end of the 3 year period anyway.

The rate is 2.59 above base rate for 3 years only after that it defaults to lender's svr.

Over the 3 year period I stand to save ~£3500-£4000 but only if the base rate remains constant at 0.5% but I think that's unlikely. I've worked it out that if the rate remains at 0.5% for 12 months then goes up to 2% for the following 24months then I would be slightly better off but anything above that would mean that I would be paying more for the variable rate one.

I guess the main question is, how likely is it that the base rate would go above 2% in the next 3 years?

MacsReturns

I guess the main question is, how likely is it that the base rate would go above 2% in the next 3 years?

As I said above, that's anyone's guess... but personally (and I don't have any special insight, I admit) I can't see it staying at 0.5% forever, and I GUESS we may be up to 1% by Christmas but I doubt we'll hit 2% any time soon... however, I think 3 years is too long to predict from here...but who can tell? I'm just hoping I clear my mortgage and can build up savings before it does go back upwards :cool:

I hate to say it, but it really is a gamble right now, though I might well gamble the same way you have

MacsReturns

Sorry, really don't know how I managed to post it twice....

MacsReturns

D'oh! Three times ... someone shoot me now, please.

thewinkshow

the Base Rate is only going to rise FACT - its just a matter of when.
no one expect it to drop below 0.5% so the only way is up.


3.5 Base Rate would still be historically very low, work out if you can afford the tracker with a Base Rate rising, to different intervals, try, 2% 3% 4% just to see how you would be repayments wise - might be nice to get a bit lower rate now but you dont want to be stung later on, and stuck.
I can see alot of people getting stung, borrowing amount at 2 and 3% and managing okay, then the conservatives start hikes every rate and tax going, and in a short space of time, the 2% and 3% is a thing of the past, be more like 5 or 6% or more if you listen to some people


I would fix, to avoid any uncertainty, I would be looking at a 5 year fix or more.