Tracker v Fixed

mp80

Hi all

I'm still deciding on what mortgage offer to take - tracker or fixed.

Tracker is 3.49% with no fees, no redemption penalty and the fixed will be 4.89% (5 yrs) with a £995 fee and the usual redemption penalties. The difference in payments is about £120 a month. I have calculated I could still comfortably afford the mortgage if rates went up to about 10%, which hopefully would either never happen or would be many years away!

My thinking is to stick on the tracker and then get out if the rates go up substantially and switch to a fixed. When interest rates were at 4-5% and I bought my current house, the fixed rate was only 5.69% so the margins for lenders is (relatively) huge at the moment therefore I'm hoping that this situation would happen if rates went up and everything else stayed the same (presumably lenders would have to reduce the margins in their products to maintain demand?)

Does this sound sensible?

MFSaver

What is your loan-to-value ratio?

mp80

We're at 82%

MFSaver

mp80 wrote: »

We're at 82%

Have a look at Yorkshire Building Society's mortgage product range, which have better rates than the ones in your original post. Their Tracker to Fixed product might be in line with your needs.

There might be other 85% LTV products out there, but I have yet to see any that clearly bests YBS's rates for a 75 to 85% LTV ratio.

mp80

Looks like a good product.

The only downsides appear to be the valuation fee and the up front fees - my lender actually have 0 up front for fixed rate (but for 2 yrs at 4.29%) - it doesn't seem worth while to go for a 2 yr fixed deal with the economy the way it is at the moment.

dimbo61

You dont give the size of the mortgage you need ? so we cant work out if the YBS dela with a £995 fee is better than the fee free 4.89% five year fix !
Its anyones guess what rates will be in 2/3/4 years but if you need security for 5 years ? then the tracker/fix might be the deal for you.
Its a big decision so why not speak to a " whole of market mortgage broker" which I am NOT!

dimbo61

Sorry the 5 year fix at 4.89% has a fee of £995 so the tracker/fix looks even better value.

MFSaver

mp80 wrote: »

Looks like a good product.

The only downsides appear to be the valuation fee and the up front fees - my lender actually have 0 up front for fixed rate (but for 2 yrs at 4.29%) - it doesn't seem worth while to go for a 2 yr fixed deal with the economy the way it is at the moment.

The YBS tracker to fixed deal for a 85% LTV ratio is 2.99% + BoE for 2 years before moving onto 4.09% fixed for three years. That is definitely better than being fixed at 4.89% for 5 years (same fee). I will do the maths to see if it is better than the 3.49% tracker.

If you only want a fixed deal, YBS has a better 5 year mortgage fixed at 4.24% (fee of 995) or 4.44% (fee of 95) if you do not want the tracker portion.

By the way, I am not a mortgage broker/advisor, just someone who is in the process of remortgaging himself and has done a bit of searching this past couple of weeks.