Always had a fixed rate, should I change now?

Miss_J

My current mortgage deal finishes in August. I've been paying 6.55% for the last 3 years and when this deal ends it will revert to Halifax's SVR rate of 3.5%. Now the more I'm thinking about it, I'm wondering if going onto a 2 year tracker would be a good idea as this will be less than the SVR rate. Halifax offers a tracker of 2.44% which would reduce my mortgage payments further and because I can manage the mortgage repayments I currently have on the 6.55% rate the Bank of England base line rate would need to rise above 4.71% before I was paying more than I currently do. I know no one can predict what the Bank of England base rate will do, but does this sound like a good idea? I've had a mortgage for the last 11 years and have always had a fixed rate, so have never had to worry about wether my repayment will increase.

holly_hobby

You have the budget and clearly understand the implications of the impact a rate rise will have, whilst enjoying a current saving (subject to svr changes of course).

If you choose a tracker rate without any redemption penalites, it would afford you the opportunity to poss change over to a fixed rate, when/if the boe rate rises take you up around your top budget figure. (naturally I would generally also expect fixed rates to also increase if boe base starts to move upwards)

You have had fixed rates in the past - and obviously understand the attractivness of them in that it allows you the opportunity to budget every month for the given term of the deal - yes fixed rates will usually have a higher headline rate than any variable product deal available at the same time, because you are buying the security of protection against rate rises. (which may actually end up lower than the variable & loading product, dependant on boe increases, which will be more of a consideration for longer term products, as its more difficult to guess what int rates movements will be over the long term i.e 5+ yrs).

If budget isn't an issue, you understand the implications of rate increases and can absorb a reasonble amoutn of them (should they transpire) without issue, then in the current climate I would take a punt on a (redemption free) tracker deal.

You could, to be super cautious, pop some/all of the savings you will be making on your normal monthly repayment figure into an ISA (no restrictions on withdrawal) and/other tax efficient products. Which will build you a nice emergency or mge fund, readily available if you need to dip in.

Hope this helps

Holly

handytips

Hello have you checked with Halifax if you can have that product, as the products available to existing borrowers are different to those available for new customers. There is also a £945 arrangement fee on the product you are talking about, the 3 year 4.14 fixed with no product fee looks a better prospect. Best tracker that i can see for existing clients is 3.39 for a 3 year tracker with a £995 fee. Be careful before you jump in. You may be better off getting a broker to do this for you as it is a very simple transaction and the product can be saved as long as you agree to it.

kingstreet

Halifax lowest product transfer is a tracker at 2.79% until 30/9/2013 with a £999 fee at a maximum LTV of 60%. The fee-free alternative is 3.19%, but for three years, not two.

At 75%, the trackers are 3.24% for two years with £999 fee, or 3.39% for three years, no fee again.

Fixed rates run at 3.54% (3.99%) for two years at 60% (75%) LTV with £999 fee.

dimbo61

You dont give the size of your loan or LTV of your home and why do you want a 2 year tracker ? what does it revert to at the end of the 2 year deal !
Long term planning might be a good idea ! with rates this low and hopefully a good LTV ( you have had the mortgage for 11 years) you could get a 5 year fix below 4% and even a 10 year fix below 5% YBS.
You have been paying 6.55% for some time how much would your mortgage cost if you reduced the term to 10 years at 4.99% ? so that you were Mortgage Free in 10 years!
Just an idea good luck

chalky2011

We am in a similar quandry at the moment, if you are considering a tracker HSBC are doing few with no early repayment charges (meaning you could fix if rates start to go up steeply) and they are fee free starting at 70% LTV with a current rate of 2.89% and then 2.39% above the BOE base rate. We are considering this seriously and we also have also been on fixed rates mostly, just wish we were more confident the rates would stay low in the medium to long term and it would be a done deal. lol , anyway best of luck whichever way you go.

Miss_J

Thanks for all the advice.

Spoke to the Halifax yesterday. They were able to offer me the following rates:

2 yr tracker 2.19%
3 yr tracker 3.19%

or

2 yr fixed rate 2.79% with £999 fee
3 yr fixed rate 4.19% fee free

The difference in payments each month between the 2 yr tracker and the 2 year fixed rate is only £16 per month, so I think I will opt for the 2 yr fixed rate and at least I can be reasurred that my mortgage reapayments won't increase over the next 2 years. Also means that I can finally pay off my old student overdraft and some other associated student debts with the money I'm saving with my fixed rate going down from 6.55% o 2.79%.