fixed or tracker for the next two years?

luckyfool

Radionotme wrote: »

You've already got the answer - it's neither!

A fee of £1000 now is over £40 extra per month in payments, which is a lot. Far better to look at a longer term mortgage like a 5 year one rather than pay such high fees. The same fees will apply to a 5 year deal, but only equate to less than £17 a month then.

... and of course the rate on a 5 yr fixed deal will be significantly higher as well.

Radionotme

araxes wrote: »

cheapest 5 year fixed rate i can get is 4.5%, so for the first two of those years interest is 12,425 - as opposed to 8,750 for 2 years at 3.19%

Are you still looking at £135,000 loan? Interest of 3.19% then should be £4306.50, vs £6075 for 4.5%
Still a large increase, but not quite the £4000 increase you suggested.
Edit - ah, I see you said for the first TWO years! Its dangerous comparing fixed and tracker rates over multiple years, as it assumes the tracker won't move.

I still think a longer term mortgage is better, but if you're adamant on the 2 year one, then the only question is how fast and how far will rates rise?
They only need to rise by 1% before the tracker rate equals the fixed rate and I think the long term historical trend is 5-6% higher than what it is now.

Of course, the flip side to that is that the BoE seem very cautious about raising rates, and could do it very slowly, a quarter point at a time, or depending how the economy goes after all the cuts, it might not rise at all for another 18 months!

to add one more complexity, you could take out the tracker, then use the lower interest rates to overpay, and cushion you somewhat from rate rises in the future, but you probably need to do some sums on that.

Peelerfart

And I assume that the cheapest 5 year fix you've been offered is what your broker has told you .

The same broker who wants you to come back in 2 years to give him another fee, or am I being a little too cynical here?

araxes

Radionotme wrote: »

Are you still looking at £135,000 loan? Interest of 3.19% then should be £4306.50, vs £6075 for 4.5%
Still a large increase, but not quite the £4000 increase you suggested.
Edit - ah, I see you said for the first TWO years! Its dangerous comparing fixed and tracker rates over multiple years, as it assumes the tracker won't move.

I still think a longer term mortgage is better, but if you're adamant on the 2 year one, then the only question is how fast and how far will rates rise?
They only need to rise by 1% before the tracker rate equals the fixed rate and I think the long term historical trend is 5-6% higher than what it is now.

Of course, the flip side to that is that the BoE seem very cautious about raising rates, and could do it very slowly, a quarter point at a time, or depending how the economy goes after all the cuts, it might not rise at all for another 18 months!

to add one more complexity, you could take out the tracker, then use the lower interest rates to overpay, and cushion you somewhat from rate rises in the future, but you probably need to do some sums on that.

i am not comparing tracker with fixed, i am comparing fixed with fixed.

Radionotme

I'll get my coat...obviously been too long a day.

araxes

Peelerfart wrote: »

And I assume that the cheapest 5 year fix you've been offered is what your broker has told you .

The same broker who wants you to come back in 2 years to give him another fee, or am I being a little too cynical here?

i think you've made the assumptions you fancy making and no facts and figures from me are going to change your mindset at this point. if you were actually interested you could take 5 seconds to put the details from me (that you requested remember?) into any one of the mortgage comparing websites and find out if i'm right or wrong about the 4.5%, but you won't because it's less fun than snarking at me. but thanks!

Peelerfart

Good luck with that then araxes

araxes

couldn't have done it without you buddy!

slummymummyof3

We have just gone for a 5 year fixed with yorkshire building society @ 3.99% - fees are around £1500 by the time you take into account product fee of £995, valuation fees and legal fees etc.

michaels

Who is the tracker with? Are there any redemption penalties?

araxes wrote: »

Hi All

I'm entering the terrifying world of mortgages and am confused as to my best course of action. Would you go for 3.19% fixed for two years or 1.69% + base rate for two years? I guess it's all down to a judgement on what the base rate is going to do and opinion on that is divided...

Thanks in advance