Debate: Taking a Tracker Mortgage is a Good Bet!

DannyboyMidlands

I think that the rates you've found are there or thereabouts. You have to remember that some of the advisors on here like to make out that finding a mortgage is double hard and should only be attempted by a professional. In reality and with a straightforward case we all know that it's a walk in the park.

I went with the First Direct lifetime tracker.

Joe_Bloggs

Watch out for fees on a small mortgage they can seriously ruin the interest rate you think you are paying.

If you took out 60000K 2.59% over 120 month ,repayment 568, and if this rate stayed constant until Mar 2014 then you would have a mortgage of only 48700. Initially the interest charged is 129.50 so 409.5 comes off the capital in the first month.

This is the end game where interest paid is the minority component of the mortgage repayment. The sensitivity of the mortgage payment to interest rate rises is low.

If the rate was to go to 4.59% (mortgage 48700) in Mar 2014 you would be paying 608 per month. The interest is 187 and the capital 421.

It makes sense to budget for interest rate rises, and general uncertainty by building up reserves of savings. As interest rates rise then it should be easier to partially offset this with increased savings rate rises or to make capital overpayments on the mortgage from savings.

J_B.

mark101

Who's that 2.59% with? I applied for a First Direct life tracker offset at the same rate but with a booking fee of 1499.

It's now gone up to 2.79% but with a booking fee of 999. Probably doesn’t make to much of a difference... but can someone punch in the figures all the same.

No penalties and complete flexibility. Though they only count your basic salary which is a shame.

Next best Santander offset 3.49% if you are a customer. 999 booking fee. Though they tell me they will lend slighty more. Which is my sticking point as I have applied for both... Santender being a higher amount.

mark101

PS try "mortgage monitor" for advice they were much better than L&C.

alinwales

I'm hopefully getting a 3.99% 5 year fix very soon. (85%ltv)
Compared to the alternative tracker which is 3.69 (3.19 above base), all it would take is a 0.5% increase to be more expensive than the fix.

For me that is not enough comfort which is why the fix is better for me.

sunshinesadly

LOL! DannyBoyMidlands - you are so right! I guess mortgage advisors have to make out they're doing some kind of rocket science!

Agree totally with Mark101 - have spoken with Mortgage Monitor and they were very helpful, unlike L & C who were suddenly not interested when they realised they didn't have a deal they could process for me and that I'd be better off going direct to lender.

Mark101 - The 2.09% above BoE base rate lifetime tracker is with either the Co-op or Britannia (they're pretty much one and the same these days). Salary multiple with Britannia is 4.2 which is generous. The catch is that you have to have a Co-op or Smile bank account and maintain it as your primary bank account (salary in; direct debits out) for the duration of the mortgage. Not a problem for me as got one anyway.

And the other beauty with Britannia is that if you're a paid up member of the trade union Unison (which I am) then you get £150 cashback for taking out a mortgage AND if you ever end up on their SVR you get a 0.25% discount on it. Not bad I'd say!

sunshinesadly

Alinwales - I agree it's best to stick with a fixed rate if you need the certainty of knowing what the monthly payments will be each month. 3.99% for 5 years not a bad fix as far as I can make out, assuming no fees of course! There are cheaper fixes if you want to fix for shorter, for example, Natwest have 3.19% fixed at the moment but think it's for 2 or 3 years only. You could try looking at Natwest and Co-op to see if they can fix at 3.59% with your LTV.

alinwales

sunshinesadly wrote: »

Alinwales - I agree it's best to stick with a fixed rate if you need the certainty of knowing what the monthly payments will be each month. 3.99% for 5 years not a bad fix as far as I can make out, assuming no fees of course! There are cheaper fixes if you want to fix for shorter, for example, Natwest have 3.19% fixed at the moment but think it's for 2 or 3 years only. You could try looking at Natwest and Co-op to see if they can fix at 3.59% with your LTV.

Ah but I don't want to fix for 3 years... It's about then that rates will start going up. I'm gambling that at 4% i'll be sitting pretty by then (not that any of my other housing gambles have paid off!). I am off to britannia, along with my current account to avoid the 1k fees. It's the best deal I could find, and they're happy so far with my application!

mark101

Looks like that coop rate has gone up to 2.29%. You've made me think about this now...

First Direct offers a flexible offset fixed for 3 years @2.79% 1999 booking fee though. Didn’t care to look at the fixed lot as they tend to be more expensive and less flexible but this seems to give the best of both worlds.

I applied for a 2.59% offset tracker for life. booking fee 1499. But nothing to say I can't change that.

So the magic question is would you be better off going for the 3 year fixed or the tracker as it’s a marginal increase in costs for stability... but then you'll need to change after the 3 years of which if no rises occurred you'd be better off with the tracker - the tracker would never go down, only up. a

After all that I have the dilemma of acquiring 35K which first direct won’t provide even though I can easily cover it but they don't count OT!! And with the figure I’m after its only 62LTV!!

So I may have to bite the bullet & go with the Santander 3.49% offset as I need the flexibility L

sunshinesadly

Mark101 - I suggest you'd be wise to give Mortgage Monitor a call and talk over your thoughts with them. Ask for Rosie, she was quite happy to talk about mortgages for ages even though she couldn't supply me and advised me to go direct to lender.

Here's the link to the Britannia mortgage I was talking about. The 2.59% rate is for LTVs of max 65% so it will be a tad higher if loan is to max 75% for example: http://www.britannia.co.uk/_site/channels/mortgage/products/current-account-lifetime-tracker.html

Hope that helps!