Stay of lifetime tracker or move to 5 year fixed rate?

nannyfish

We've currently got a mortgage of around £121000. Our current deal is a lifetime tracker at 2.77%. Should we move to a 5 year fixed at 3.5%? Are deals going to get worse? Or should we stick to what we've got and hope for the best. If we switch, it's an extra £60 per month, but without the uncertainty.

shop-to-drop

Only you can make the decision in your shoes I'd probably switch if there were no other additional costs in doing so.

getmore4less

uncertainty in 5 years

whats the follow on rate in 5 years

Rikki

Why would you change from a lifetime at 2.77% to a short term fixed at a higher interest rate?

nannyfish

I'm no sure of the follow on rate. Our mortgage adviser is the one looking at the best mortgage- we've used him for 3 previous mortgages and has always been good. I just hate the gambling aspect of wether to risk sticking to the current deal (cheaper in the short term) or taking a fix now.

nannyfish

Rikki wrote: »

Why would you change from a lifetime at 2.77% to a short term fixed at a higher interest rate?

Because it's a tracker. Rates have got to go up again at some point. If they go up, the fixed rate deals will also be higher. The cost of fixed rate deals is already increasing.

StephenM_2

nannyfish wrote: »

We've currently got a mortgage of around £121000. Our current deal is a lifetime tracker at 2.77%. Should we move to a 5 year fixed at 3.5%? Are deals going to get worse? Or should we stick to what we've got and hope for the best. If we switch, it's an extra £60 per month, but without the uncertainty.

That depends on your view of when interest rates start going back up. The so-called experts keep changing their minds and pushing the date back, with one article this week saying it won't be until January 2015. The longer they stay where they are, the better off you'll be staying with the tracker. On the other hand, if they go up sooner you'd be better off switching.

Personally I'm sticking with my lifetime tracker, but at only 1.49% it is a much better deal than yours.

HAMISH_MCTAVISH

nannyfish wrote: »

I'm no sure of the follow on rate.

That's fairly important.

In general terms, it's immensely unlikely that anyone can pay less over the term of a 25 year mortgage by taking fixes as opposed to trackers.

Buying a fix is like buying insurance. You pay extra for peace of mind, and someone else makes extra profit for selling it to you.

Just as with insurance, the reason people are willing to sell it to you is because they believe they've priced it at a level where financially they will win and you will lose.

pwllbwdr

nannyfish wrote: »

Because it's a tracker. Rates have got to go up again at some point. If they go up, the fixed rate deals will also be higher. The cost of fixed rate deals is already increasing.

Thing is people were saying exactly that about going for a 5 year fix more than 2 years ago. They've now got only 2-3 years or so to go on their fix and my rates have been much lower than theirs for the duration. We don't know what will happen with base rates in those 2-3 years.

You can't use the "rates can only go up" argument to justify a fix because it isn't true. They can stay the same over a given timeframe, and they might. The choice between a tracker and a fix has to be based on an individual's finances and their attitude to risk.

HAMISH_MCTAVISH

nannyfish wrote: »

Our current deal is a lifetime tracker at 2.77%. Should we move to a 5 year fixed at 3.5%?.

I'd be more inclined to move to a cheaper tracker if you can find one.

Chances are that base rates won't rise significantly for many years.

nannyfish

Thanks for the replies. An afternoon of reading thrilling financial websites while watching the football becons. There is a good article in thisismoney.
I'll sleep (or not sleep) on it