To fix, or to track?

Ingsy

Hello, had an offer accepted on a property at the weekend, and had already narrowed the mortgage down to 1 of 2, via online comparisons, financial adviser and even an estate agents in house bod. The options come down to this:

1. A 5 year fix at 4.19% with Yorkshire Building society

2. A track of BOE + 2.3% with no early repayment charge, with ING.

The tracker would save me £135 a month, as rates stand at the moment, and I would be happy, and able, to overpay this saving off of the mortgage from day 1.

As there are no early repayment fees, we can ditch and switch at the first sight of rates rising, but I doubt by then we would be able to fix as low as 4.19%

I guess it comes down to whether I'm prepared to take the risk. Unless one of you lot knows what interest rates will do over the next few years?

Can anyone give me any advice or things to think about on this?

Cheers.

Thrugelmir

With the 5 year fix what's the follow on rate ?

Also what are the product fees?

dimbo61

The YBS follow on rate is the SVR of 4.99%( at the moment) and the fee is £1495
Its all down to security and how you feel rates will rise over the next 3/4/5 years
I have just finished a five year fix with YBS and I was happy with our decision as we needed the security.
We have paid a large part of the mortgage off over that time by overpayments and offsettting and saved thousands of pounds in interest

Ingsy

5 year fix would go on to their standard variable, which is currently 4.99%.

Fees are £1495 for the fix, £1300 of which can be added to the mortgage (which I probably would do). £750 fees for the tracker, added to the loan.

leftieM

I have the same dilemma - fix or track? I'm going to get a tracker I think. We can cope with higher interest rates but the tracker allows us to jump ship if we want and there are no penalties for redeeming the mortgage.
Fixed rates may get more competitive again. They are not linked directly to BoE base rate. I was oogling sub-4% fixes before Christmas. I don't think, from what I've read, that interest rates are going to take a huge leap in the next couple of years although they will rise. It's all a gamble!

lightspeed

Same dilema here too:

It does all come down to risk and whether you are prepared to take that risk.

I am edging towards a tracker only because i dont see interest rates going up by too much, too quickly.

In the meantime i can overpay and hopefully mortgage lenders will become more competitive in a year or two with either fixed rates coming in line with the BoE like before and/or tracker rates reducing.

As long as there are no tie ins and fees i think its a decent gamble atm.

leftieM

Another factor is the rate you end up on at the end of the fixed rate. Some of them are pretty high and you could be stuck with it if the LTV was less favourable in 5 years time.

sdd7677

leftieM wrote: »

I have the same dilemma - fix or track? I'm going to get a tracker I think. We can cope with higher interest rates but the tracker allows us to jump ship if we want and there are no penalties for redeeming the mortgage.


Fixed rates may get more competitive again. They are not linked directly to BoE base rate. I was oogling sub-4% fixes before Christmas. I don't think, from what I've read, that interest rates are going to take a huge leap in the next couple of years although they will rise. It's all a gamble!

I am totally agree and after scratching head, reading things around, I am going for the tracker with HSBC for BOE+1.89 with no tie ins. If any news of big interest rate hike all of sudden seem impossible to me. BOE can't risk it. It happened in the past but situation was completely different. You can easily fidn it on google

Naf

Santander offering a deal to get onto a variable for the time being (but a better variable than other SVRs) and then at any time you can choose to take a fixed rate with no fees to do so. Considering they have best buy mortgages every week, and are pretty much the biggest mortgage lender in the UK market at present... seems like a good option.

whatyadoinsucka

agreed a tracker/variable will save for you in the short term at least a year, if you are overpaying then good.
If you have overmorgaged in the past and have a low income relative to the mortgage get the fix. 4.19 sounds a good rate for 5 years,
whatever you do don't get a two year tracker. as you'll come out with no benefit.
i will stay variable for the forseeable future

mark55man

the trouble with the santander deal is that the moment you want to swap will be when the rates are going up. i fixed for 10 years at a good rate and whilst I am overpaying a bit compared to SVR now I am still confident coz I couldn't afford if the interest rates went up.

My problem was that I called the inflation we got in 2010 and this year - I just thought the BoE would raise rates to combat it. I think you will be relatively neutral - if you do go for variable I would take a 2 year aggressively discounted product and overpay if you can, then when rates do start to go up (they can't exactly go down) you should have already taken the edge off the rise