Debate: Taking a Tracker Mortgage is a Good Bet!

sunshinesadly

Any thoughts on the debate question: "Taking a Tracker Mortgage is a Good Bet"?

I'm in the process of remortgaging and after spending almost 15 years on fixed rates because I wanted the certainty I am actually considering a tracker.

My current fixed (deal ends June) is 4.49% so not horrendous but higher than my current lenders SVR. I've been aware that I've been paying a bit over the odds over the last 3 years but wanted the certainty of knowing what my payments would be so have turned a blind eye to what's going on in the market!

Reason for my change of heart on fixed-vs-tracker is that my current thinking is that the bank of england base rate is probably going to stay at 0.5% for the next 3 years (there's an article on MSE saying much the same). I can get a tracker at 2.09% above the bank of england base rate. That 2.09 above base will be fixed, it can't rise for the duration of the deal. Only the base rate can rise (and with it my mortgage repayment costs of course).

Have roughly worked out that the base rate would have to rise by about 2% (to 2.5%) for my mortgage repayments to go back to what they are now, thus eating up the savings made by taking a tracker now rather than a fixed. For the next 3 years that seems a reasonable risk to me. Best fixed I can get my hands on is 3.99% and best bog standard SVR is same.

What is the view of other MSEs? Are trackers a good bet?!

Dave_Ham

You must be looking in the wrong places, as the disparity between fixed and trackers is not that huge as displayed here.

Every case is unique so cannot state fixed are better, trackers are better etc.

Product Fees or lack of also play a part here.

Certainly, whatever you personally select it is going to better than what you have been paying. If you can still pay this going forward you can wipe years off of your mortgage..

All the best

opinions4u

Any thoughts on the debate question: "Taking a Tracker Mortgage is a Good Bet"?

I'd say it's a discussion point, not a question.

Alternatively, it's a statement.

sunshinesadly

London and Country brokers (whole of market, the chaps that sponsor the MSE mortgage guide) quoted me fixed deals of 3.8% (2yrs), 4% (3yrs) and 4.5% (5yrs), and variables/trackers at similar rates. All deals are no fee. Better deals are probably available with fees, but I'm not a believer in paying them if I can help it.

When I mentioned to them that I'd found a lifetime tracker at 2.59% they said they couldn't better that.

Problem with brokers, including London & Country, is that there are some lenders who don't deal with brokers, eg, HSBC, First Direct, Britannia....there are others too.

If you know of better deals Mr Ham, then spill the beans so we can all learn!!

sunshinesadly

Yes I agree, it's a discussion point. I didn't have my english grammer and prose book out this morning when i wrote my post! LOL!

dshart

Whatever you decide it is a gamble in the end as to what will happen with interest rates, all you can do is do as much research as you can so you can make an informed decision and then hope the interest rate moves the way you predict.

A lot of trackers are not looking as attractive now as they have priced in the interest rate staying low. I was lucky and switched from years of doing fixed rate deals with no tie ins, to a lifetime tracker that is 0.69% above BoE base rate and I cannot see myself moving from this unless there is a drastic change. If I was faced with a tracker at 2% above base rate I feel the decision would be tougher as this is similar to a lot of SVR's and in either case the rate will not go any lower.

In the end I would say take your best educated guess on what will happen to interest rates and work out which deal costs you least over the period of time you want to consider, including fees for the various products.

cr1mson

This is such a subjective thing. It really depends on your circumstances however things I would consider are:

Remortgage fees
Whether you plan to move? If so when?
Views on Base rate moves
Could you cope if Base rate moved up?
Is certainity worth paying a premium for?

I would run up a spreadsheet to plug in various scenarios and got from there but ultimately you have to make the decision as it is you that will have to live with the consequences!

C

Dave_Ham

And this is why I say all circumstances are unique and L & C are not truly independent (side point)

Although as a broker I cannot place business with HSBC etc. I can offer independent advice and charge a fee with the commission being rebated to the client if they are commission paying and still recommend the product. Client truly gets the best rate, but and a big BUT if they meet their criteria and likely to be accepted, hence why a client would pay for this advice.

An example of this, search these forums for HSBC and decline and you will find many.

So unfortunately, I am not going to wave a magic wand and say this product or that product as this may be inappropriate, what I will confirm is other things being equal and assuming low loan to value; there are better priced products out there.

Good luck

opinions4u

sunshinesadly wrote: »

Yes I agree, it's a discussion point. I didn't have my english grammer and prose book out this morning when i wrote my post! LOL!

It would appear not.

sunshinesadly

Thanks Cr1mson and dshart for useful additions to debate!

Shame about pedants more interested in criticising me for word useage than actually contributing to the debate! There's always one!

sunshinesadly

Having now spoken to 2 brokers and one Advisor I'm still of the opinion that a lifetime tracker mortgage of 2.59% (2.09% above base rate) or a fixed of between 3.49% and 3.99% is the best on offer at the moment. Assumptions are low LTV, and no mortgage arrangement fees etc. Mortgage is for 10 years and less than £60k.

Therefore also of the opinion that Mr Ham is bluffing about there being better rates around.