Stay on lifetime tracker of move to 5 year fix?

pknottm

I have a lifetime tracker mortgage with First Direct (0.79% above base) but can't decide whether to move to their 5 year fix at 3.89%.

I've already arranged the 5 year fix in January and have until July to start it.

The mortgage is for £60K and I plan to pay it within 8 years.

I realise it depends on what the interest rates will be doing in the future, but would be interested in what others would do.

I'm tempted to stay on the tracker as it's a lifetime, so should be a reasonable rate for the full 8 years.

dimbo61

As your term is only 8 years and the tracker is a very good rate of 0.79% above base rate I would stick with the tracker and try to build up savings in cash ISA,s that way if rates do rise you can pay a lump sum off

getmore4less

Why not consider the numbers.

£60k over 8 years with 5y fix @ 3.89% £728.29pm

With the tracker starts at 1.29% £658.14pm

So while rates are low you are saving upto £60pm, pay/save that and the mortgage term could become 7y 2.5m

the longer base stays below 2.5 the higher it has to go to be worse off.



If you really want to be sure of a not being hit by any rises aim for 5 years on the fix £1100pm

Gorgeous_George

Best case
If base rates stay at 0.5% for 5 years you will save £70 per month (£4,200 over 5 years). After 5 years you will owe £1,480 less by staying oin the tracker. Total saved = £5,680. You could overpay by £70 per month and knock over 9 months off your mortgage.

Worst case
It is hard to predict what base rates will do. They could rise rapidly in the very near term. I don't think that they will but what I think is not important. What do you think? Are you prepared to put your money where your mouth is - so to speak?

I would not overpay. Instead, I would save £70 per month in first direct's regular saver at 8%. When it matures in a year's time, I'd stick it in an ISA (well, I wouldn't but you could - I'd lend it at Zopa). In year 2, start another regular saver and repeat. If rates rise, it may be better to stop saving and to start overpaying.

Can you borrow more at 1.29%? If so, take it and save that too.

GG

getmore4less

Another point I keep forgetting.

When rates go up so will savings rates, they may lag the mortgage rates a bit BUT.

Savings curently at base + 2%+
Mortgage currently at base + 0.79%

that is a big enough window to probably make savings a longer term option(DIY offsetting).

Currently the £1 saved is worth about £2 of mortgage if you find good rates/ISA

pknottm

Many thanks for the replies.

I was thinking it would be best to stay on the tracker too, as the base rates have to rise to 3.1% within a couple of years before I would start to lose out, which could happen.

At least if I stay on the tracker, I should be on a decent rate after 5 years, whereas the fixed rate would revert to SVR.