New property & Mortgage advice

dougy432

Hello All,

My wife and I have a dilema! We are in the middle of buying our first house together. With the rumours of interest rates going up, we have a tracker mortgage with the C&G in place ready to be signed. But we are thinking a fixed may be the better option.

Just to give you a few more details, we are both in our early 40s and we are leaving a rented property to get on the property ladder. We have to take out a 90% mortgage and we have scrimped and saved to get the 10% together. Now A is this the right time to buy, and B do we turn around our mortgage that is in place and try and get on a fixed as there seems to be some better options, as it appears the interest rate will increase.

Thanks in advance for any thoughts and advice

Dougy

poppy10_2

Interest rates are at a 300-year low, the only way is up from here. A tracker would be a one-way losing bet.

dougy432

I think we have realised with the recent talk of interest rates going up, a fixed mortgage would be the way to go.

Now we have the dilema, do we buy at all, as the forecast for house prices doesn't look good. Read somewhere a projected 20% decrease in house values over the next couple of years.

Can we borrow someones crystal ball please?

Regards

Dougy

lionelator

Have to disagree with both of you here, since the OP asked for views heres mine.

- 80% lifetime tracker with HSBC is sitting at 2.99% at present.
- 80% fixed 2 year is 3.99%
- 80% fixed 5year is 4.99%

Which means in order for the 2 year fixed to make sense the rate would have to rise by well over 1% in the next 2 years. Until then youre paying 1% more at present, and you dont have the flexibility of unlimited overpayments with a lot of banks, and although people are talking about rate rises keep in mind a lot of people are still on the edge when it comes to mortgage payments, and given the state of the economy I strongly doubt you will see the rates shoot astronomically high anytime too soon.
- To make the 5 year fixed make sense, the rate would have to rise even higher, and even then you have to compensate for all the time in between when the tracker rate is significantly lower than the fixed rate.

Its a big decision and no one has all the answers but Id think very long and hard about going for a fixed rate atm. Although it may make sense from the viewpoint of 'the only way is up', are fixed rates atm really worth it in comparison to trackers? I dont personally think so.

Thrugelmir

lionelator wrote: »

- 80% lifetime tracker with HSBC is sitting at 2.99% at present.
- 80% fixed 2 year is 3.99%
- 80% fixed 5year is 4.99%

OP is borrowing 90%.

Which is more expensive option over the term of the mortgage. Borrow £150k at 4% or £130k at 6%.

This reflects the possible movement in the next few years.

The £150k option is cheaper over the term of the mortgage.

So buy when you can afford it. Though factor in an increase of 3% in interest rates. Then see of your budget can cope.