FTB Tracker or Fixed?!

welsh_mother

Morning all,
My partner and I are buying our first home very soon. Now the fixed rate at Nationwide for 2 years is at 5.98%. This includes 2 years free redundanct/accident cover. Nationwide's own rate is 3.99%. Is it wise for us to do the tracker mortgage?! We have had mixed opinions on this so I am interested to see what you guys think. The difference in our mortgage payments would be £90 a month, bearing in mind we would then need the insurance that we get free on top of this.

I have moved this from another forum to see what other replies I get.

Thanks in advance.
Lisa:beer:

JIMBO

Personally I dont think a 2year fixed rate is a good option, you would be better with a 5 year fixed rate.

It is unlikely that within 2 years the variable rate will be at the 2 year fixed rate you have been offered. However its all a guess as to what interest rates will do, Im expecting base to be at 1.5% by the end of next year, perhaps 3.5% by the end of the following year.

welsh_mother

Cheers Jimbo, that is exactly what I have been thinking too. It a diff of nearly 2%.

Thrugelmir

Personally I would use the £90 plus a little more if you afford it to overpay the mortgage by taking the variable rate.

This will mean you can easily absorb a 2% increase in the base rate. Also give you flexibility in making overpayments when you can afford to do so.

As your capital reduces then so does the the impact of interest rate changes.

betmunch

What makes you think you can have the 3.99% rate?

Looking at the website the tracker rate available is 4.63%

On both the fixed and the tracker rates you have to wait 2 years before getting the 3.99% rate, and by then it could have all changed anyway

welsh_mother

I know because it was one of our options. We have special deals with Flex Account and First time buyers amongst other things

betmunch

I'm not convinced, I would check in the branch that the 3.99% rate is available from the off

Mobility151990

welsh_mother wrote: »

Morning all,
My partner and I are buying our first home very soon. Now the fixed rate at Nationwide for 2 years is at 5.98%. This includes 2 years free redundanct/accident cover. Nationwide's own rate is 3.99%. Is it wise for us to do the tracker mortgage?! We have had mixed opinions on this so I am interested to see what you guys think. The difference in our mortgage payments would be £90 a month, bearing in mind we would then need the insurance that we get free on top of this.

I have moved this from another forum to see what other replies I get.

Thanks in advance.
Lisa:beer:

You are aware that the 5.98% 2 yr fixed is for an LTV of 85-90% correct? Also if that is what you want an LTV of, 85-90% The tracker version of this exclusive is +4.13% and £896 fee.

At nationwide there are no other products available to you with an LTV that high.

P.S. http://www.nationwide.co.uk/mortgages/interestrates-types/rates.htm?buyerType=ftb&propertyValue=200000&mortgageAmount=175000 is a link to show u NBS products for 85-90% LTV if you want to see for yourselves

beecher2

I agree with the others - can see the 5.98% fixed but the alternative is definitely base plus 4.13% - think you've got mixed up with their SVR. Both are flexaccount exclusives.

Bath1865

Looking at 5.98% fixed vs variable 3.99% or 4.63% you would have to be certainly at the pessimistic side of predictions for future interest rate movements over the next 2 years for the fixed product to end up costing less.

I agree with Jimbo re a 5 year fix. As a first time buyer, presumable with a high proportion of your income paying the mortgage, certainty is valuable, but not if the certainty is not for very long and is not competitive as evidenced by the 2 year rate offered.

I slightly disagree with thruglemir as the overpayments provide only a small cushion against future rate rises, and sensitivity to interest rates is determined by outstanding term, not the balance. However overpaying will help lower the eventual interest paid and most importantly for you the LTV.

welsh_mother

Cheers guys:)