Fixed or Lifetime Tracker?

V6Matt

JimmyTheWig wrote: »

Really? I've always thought HSBC were a bit rubbish on overpayments (and assumed FD to be the same).
Obviously with an offset (sounds to me like you are a prime candidate for one) then overpayments are clearly all part of the deal.

I think the firstdirect and HSBC policies are a little different, despite being the same company.

e.g. on First Direct 5 year fixed (which most companies give a nominal/non existant option to overpay).

"Unlimited overpayments without charge - Yes

When a borrower chooses to make a larger monthly mortgage repayment on their mortgage than is stipulated under the mortgage terms, without incurring a charge."

getmore4less

dimbo61 wrote: »

You are building up an emergency fund just in case and saving 3.79/4.09% tax free with every penny in the offset account.

The old get a higher rate so you save more.

You may save 3.XX on the savings you add but you are still paying more on the rest of the money so you don't save any more than you would if you had chosen the lower rate in the first place.

the problem with the Fixed rate offsets is the long term rates are higher than the low rate lifetime trackers so you realy do need to have the net ballance down to stop this making a big difference.

Start low and overpay gets more of the debt out of the way.

Agree 2 years is a non starter, 5year @ 3.79% with a higher follow on not so clear cut for me.

Do a projection with the estimated overpayment as well as the saving for the best case senario
Do some what ifs and factor in some rate rises to see where the break even points are then think about the trade offs.

getmore4less

My concern still remains as to whether 1.89 is a fair rate, especially as some people mention historic trackers of 0.95 + base. Therefore am I increasing my risk and potentially not getting that great a lifetime tracker rate

.

Remember with the lifetime tracker you are not locking in you are setting your floor, if margins close you can switch if the fees/savings make sense over short period(1-2 years)

V6Matt

Thanks for all of the advice.

I looked at historic BOE rates over various 5 year periods and the vast majority of the time there wasn't a movement of more than 2%.

Now the argument could be had that we are at historic lows, but my point of view at this time is that this is true but I think the recovery is going to be slow, we are not going to see a massive improvement in the economy over the relative short term 4-5 years and I think any increases will be gradual and slow. This is entirely an assumption/risk, nobody knows.

Given the higher arrangement fees of the offset 5 year fixed and follow on rates, I think I mitigate a lot of the risk by plumping for:-

Lifetime Offset Tracker with First Direct, even when doing the sums against the good value 3.89% non offset First Direct (with similar low fees) and taking into account the benefit I get from the offset feature, I can allow myself a 1.8% leeway, which I personally feel will take me to at least a 4 year period and I plan on making a number of overpayments along the way, therefore reducing my relative risk against any interest burden.

I think the point that the fixed rates have been set with an extra risk contingency over current indications also rings true and I have enough in the kitty and a get out clause to help mitigate any potential risk.

So I plumped for the FD tracker last night. Thank you for all the help/suggestions

JimmyTheWig

I think you've made the right choice for you, Matt. Well done.