Tracker or fixed?

rising_from_the_ashes

Hi, my current mortgage deal's just come to an end.

I was looking at fixing but some of the "arrangement" fees are horrendous and I just don't see how they can provide good value when adding the cost of these to my mortgage amount when they only last such a short time.

I've seen a couple of good tracker ones - 2, 3 and for life which have no arrangements fees (or penalty fees at the end).


However, I've never had a tracker before - I know they can go up if the interest rate rises (but can also go down).

Any pitfalls apart from this?

Thanks

Peelerfart

What is the outstanding mortgage amount and what is your LTV?

Bothm together with the duration of the deal may.or may not justify a hefty fee.
Personally I dont like fees but then who does ?

PF

rising_from_the_ashes

Would be looking for around £70k

LTV is 40%

It just seems ridiculous paying a fee of £1000 - £1500 for something that only lasts 2 or 3 years.

jimjames

A fix over the next 2/3 years seems pointless to me as you'll be paying over the top for it with a very low (in my view) likelihood that base rates will rise above it. You then pay a hefty fee for the privilege and no flexibility to exit unless you pay another fee.

Think where rates could be in 2/3 years and work back from that. Much more than a 1% increase in base rates over next 2 years seems unlikely and that would only give base rate of 1.5%.

Our tracker will only increase if rates go above 2% as that is the current floor that is set. I've never had a fixed rate as I've not seen the point, generally they seem to favour the lender not the borrower and I've seen some nightmare scenarios with friends tied into 5%+ fixes when the base rate plummeted in 2008/9. A tracker will allow you to keep in line with base rates whichever direction. They are unlikely to drop more but big increases are also unlikely.

lightspeed

We have just completed a remortgage.

Started looking back in March/April and remember getting an AIP with YBS - 5yr fix @4.79% (LTV 75%) £495 fee.

As i write this today, the like for like rate from YBS is now 5yr fix @3.69% (LTV 75%) £95 fee.

At the time i was more than prepared to fix on the first deal but ended up talking ourselves out of a fix and went for a fee free, no ERC tracker (+2.49% HSBC).

We completed the above deal yesterday and i am already looking at 5 year fix's again as they are now far more competitive compared to back in April.

We have "some" flexibility with payments making a tracker mortgage less of a risk, however, the 5 year fix's mean that currently there is only about £50pm difference between our tracker and the YBS 5yr fix.

I doubt 5yr fix's will fall much more (bearing in mind that they are currently very low historically), equally, i dont see the BOEBR rising much in the short to medium term either.

The thing to remember is that a tracker mortgage is probably at its lowest point now and is unlikely to go down any further. At 40% LTV you could get a tracker @ around +2% above BOEBR meaning you have even more of a safety net when rates start to rise.

When making our decision i simply looked at the max we would want to pay out monthly (not the max we could pay if needed) and compared trackers and fix's.

2 months ago the tracker won hands down - if i was making the same decision now, i would probably be favouring a 5 year fix.

rising_from_the_ashes

Thanks both

Lightspeed - the problem with the fixed ones is the level of fee that's payable, I've the 2/3 year ones seem to range from around £500 to £1,000 and the 5 years around £1,500!

I'd have no choice but to add this to my mortgage amount (not keen to do if I can help it), if I went for one with a £1,000 fee over 3 years that's equivalent to nearly £28/month and even over 5 years, £25 / month.

I'm having problems justifying this - will have a hunt around and see what else I can find.

Jimjames - thanks, some useful insight there!

dimbo61

Lightspeed has pointed out a 5 year fix at 3.69% with a fee of £95 with YBS so thats one very good deal

rising_from_the_ashes

Sorry, misread, I thought it was £495.

I've had a quick look and looks quite tempting apart from the ERC (5% to 30/09/14, 4% to 30/09/15, 3% to 30/09/16) - unfortunately payable even if moving.

I did find a couple of trackers with YBS with "drop lock" - what's that?
Thanks

Peelerfart

Apparently,

"Yorkshire Building Society (YBS) has launched its first drop-lock mortgages,
allowing customers to take out a tracker rate with the option of moving
to a fixed rate without incurring penalties."

But I'm with Dimbo (again!) there 5 year deal is a stormer and I'm tempted by the offset version
even though I've got a super low tracker ATM.

davidscot

rising_from_the_ashes wrote: »

Hi, my current mortgage deal's just come to an end.

I was looking at fixing but some of the "arrangement" fees are horrendous and I just don't see how they can provide good value when adding the cost of these to my mortgage amount when they only last such a short time.

I've seen a couple of good tracker ones - 2, 3 and for life which have no arrangements fees (or penalty fees at the end).


However, I've never had a tracker before - I know they can go up if the interest rate rises (but can also go down).

Any pitfalls apart from this?

Thanks

I have posted a very similar post to this in this forum 'Fixed Rate ends Sept' and our LTV and outstanding sum are very alike so I will watch this post with interest. Any otther tips and help would be grateful. Cheers

dimbo61

You and the last poster have to make a choice ? now do you want the security of a fix and know what your mortgage rate will be for the next 3/5 years!
Dont even think of a long term fix if you plan on moving any time soon.
I have been a YBS customer for the last 6/7 years and like there offset mortgages and at the time I paid nearly 5% so a fix at 3.49/3.69% is one hell of a deal for long term security and the ability to overpay by 10% ( fixed ) or unlimited OP,s ( offset )
£95 is not a fee wait till you get the solictors fees and other costs!!!

Your decision