Fixed or Tracker

camhav

Hi, Can anyone offer their advice on which type of mortgage they would recommend for our situation?

In few months we will be coming to the end of a 2 year fixed rate offset interest only mortgage with FD & have managed to pay off £13K capital in 18 months (the first 6 months were paying for rented accommo while refurb'd new house so couldn't overpay initially). The flexibility of making overpayments this way when we can has suited us.

I am a stay at home parent & my husband's income is approx £50k, our LTV is 40% & our mortgage will be £142k.

We can afford a max month outgoing of approx £800 but are not sure whether to play it safe & go for 5 year fixed rate repayment of 4.59% with approx £17k of capital being paid off at end of term or to take HSBC lifetime tracker of 2.29% interest only and hope to pay off much more capital.

Any advice on whether risk of not fixing is worth it & likely to pay off more capital much appreciated.... many thanks Christine

dimbo61

For security with a baby/young child and only one income I would take the 5 year fix and overpay whatever you can afford.
Any 5 year fix under 5% is I feel a good long term fix ( is it offset )
What have FD offered you or do you go onto a tracker when you fix ends?
I like the flexability that offset mortgages offer and lots of people sing the praises of FD
At the same time do you think interest rates will rise by more than 2% in the next five years!

camhav

Thanks for response - that is the dilemma as we do have young kids and for the foreseeable £800 p/m will be the most we can pay... FD have offered a 4.59% 5 year offset fixed repayment which is £797 a month - so really we would have nothing to make overpayments with & are really tempted to go for the HSBC IO tracker but are worried that if rates went up quickly & to a high rate we would be really snookered!!

dimbo61

The IO cost of the FD deal is £543 and the HSBC deal is £271 and I dont have a crystal ball about mortgage rates but the normal interest rate for the BOE is more like 5% than 0.5% so its your decision.
Will things change in 5 years ie wife back at work or pay rises at work ?
If you need the security 4.59% is a better rate than I have just paid over the last 5 years and it was offset so we put every spare penny in the offset as emergency funds.
You managed to clear £13K in 18 months but you now can only afford £800 a month !!
Good Luck on your decision

getmore4less

At £800pm and an interest only the rate would have to 6.78% before you can't afford it.

So you probably don't need to fix for that reason.

What rate is you current deal going to?

You are just playing the rates guessing game to see how much capital you can pay off.

camhav

Yes it is exactly doing that the rates guessing games & don't know if we are very good at it!!:) - hoping if we opt for the IO of 2.29% with HSBC, while we know eventually if rates return to 5 % or 6 % we wouldn't be paying any capital off we would hope the extra we pay until rates reach those levels would exceed the capital under the fixed rate deal - is it a chance worth taking though? Our new deal is 4.59% on 5 year fixed repayment with FD - so would clear £17k over the 5 years but the potential to clear alot more capital if rates stay below 2.5/3% make the IO option v attractive.... what to do?!?!? Dimbo61 yes I know that reads strange, we did manage to clear extra as a of share scheme matured allowing us to put extra £5k in over past 18 months - so we have been paying more or less £800 per month in total as current deal was fab.

Peelerfart

OP are you sure this an offset ? I can find the deal on their website but it's for a repayment mortgage,not an offset ?

getmore4less

You don't have to take the fix with FD, I thought some of the FD fixed offsets reverted to good tracker rates(now they are all SVR).

FD web says there is an offset at 2.79% for existing customers allthough 0.5% might be a bit to much to keep the offset facility.

I am an offset tracker fan, but we got in when the trackers were on much lower margins, because it is still possible to Stooze a bit of money.

camhav

Peelerfart wrote: »

OP are you sure this an offset ? I can find the deal on their website but it's for a repayment mortgage,not an offset ?

Sorry no I meant repayment - currently on offset fixed rate IO with FD but new IO rates are much less attractive:(