Fixed or Tracker

shawthedogs

Hi all, we are currently at the stage of buying a new house. I'm looking for a mortgage and cannot decide weither to go with a 2 yr fixed rate at 4.79 or a tracker which is a good rate at 2.49 it tracks at 1.99 above the base rate. I know that it is likely at some point this year there will be a rate increase but is it likely to be more than 1.5%. Im kind of in two minds but the low rate tracker is drawing me in, leaving low payments. Any advice is appreciated, Thankyou for your time

opinions4u

I'd go for the tracker if was me, and probably overpay as if the real rate was 5%.

You know the risks of rising rates - if you can tolerate them, track cheap!

Thrugelmir

Personally I would opt for the tracker rate, but make monthly mortgage payments equivalent to at least the 4.79% rate on offer. That way the envitable increases in base rate will be absorbed. While at the same time reducing the amount owed. Which in itself reduces the impact of future rises.

Also a 2 year fix gives little protection.

powerwin

This is not professional advice ...

If you were to go for the Tracker, you need to know that you can cope with the impact of future interest rate rises. Rates are very likely to rise at the end of the year, and once they start, they are likely to increase rapidly ... You need to do some sums to see what each 1% rise in interest rates would do to your tracker repayments. Also, do you have a contingency fund that could help you in the event of increased mortgage repayments? You also need to be very financially disciplined so you save / overpay when the tracker rate is good, ready for it to increase. Keep in mind that interest rates are historically very low and will need to be raised to counteract inflation.

If you aren't disciplined, think about the Fixed rate, because this will make future financial planning easier.

Rgds

fiesta04

Personally I would not take a fixed rate for less than 5 years. But then that's me. 3 years ago I took a 10 year fix and then 3 months later the crash. Take my advice at your peril.