To move mortgage or not

DaisyFlower

Our mortgage fixed runs out soon with Barclays. As its one of their old style mortgages they cannot offer another fixed rate unless i do an internal remortgage to their new product. Their would be no charges for the solicitor/surveyor and i'd get a very good rate for two years.

However, if i dont switch i will simply transfer to a tracker mortgage under 2% (plus banks base rate) but the new product would revert to 4% above banks base rate when the fixed rate runs out.

I like having a fixed rate and have never had a tracker mortgage but am now unsure what to do. Am tempted to return the paperwork and say no thanks to the fixed rate and see how interest rates go. What do others think. Thanks

R_P_W

If my lender offered my a tracker ay 2% above BOE base rate I would certainly take it. There seems to be a view that BOE rates shouldnt rise much in the next 2 years.

What fix are they offering you and how long does it last?

If it was me I would take the tracker and overpay as much as I could now, so that if in 3 years time the rates do start to rise you have hopefully improved your LTV position and will be able to access better rates.

There are others that will advise against the overpaying as your interest rate on mortgage will be less than you can get in a savings account - also well worth considering.

Thrugelmir

DaisyFlower wrote: »

However, if i dont switch i will simply transfer to a tracker mortgage under 2% (plus banks base rate)

At best this is as good as you likely to get in the years ahead.

Forget the low interest rates of the credit boom. They are never going to return.

DaisyFlower

R_P_W wrote: »

If my lender offered my a tracker ay 2% above BOE base rate I would certainly take it. There seems to be a view that BOE rates shouldnt rise much in the next 2 years.

What fix are they offering you and how long does it last?

If it was me I would take the tracker and overpay as much as I could now, so that if in 3 years time the rates do start to rise you have hopefully improved your LTV position and will be able to access better rates.

There are others that will advise against the overpaying as your interest rate on mortgage will be less than you can get in a savings account - also well worth considering.

Thank you for replying.

The fixed rate offered is 2.2% for two years reverting to a tracker of 3.99 over base rate. If i stay on the current mortgage it will revert to 1.95% over base rate when the fixed rate expires next month.

LTV is quite high, roughly 50% when purchased hence the good fixed rate being offered.

I like the idea of overpaying and keeping the original mortgage, 1.95 above base seems a good rate for a tracker i think.

Joe_Bloggs

The fear of higher future Interest rates has prompted many to sign up to overpriced long term fixed rates ditching a very low rate tracker. A fixed rate represents security to many whereas a base rate tracker is the opposite. A low rate tracker has been far preferable to a standard variable rate and most new fixes end up on this.

One solution, when on a tracker, is to budget for a higher interest rate. This involves putting aside, in savings, the difference between payments on a worst case higher rate and payments on the current low tracker rate. It should be possible to find a savings account that pays more than the low tracker rate.

Were tracker rates to rise then these savings could be used to cushion the blow to the mortgage budget. If the tracker stays the same then the interest on the savings compounds to boost savings.

There is little point doing this if there is any debt at a higher interest rate than the low tracker rate as these debts should be paid first.

In my case my tracker rate is 2% above base (2.5% at present). I can get 2.8% instant access savings (2.24% net ) so you may think I would be better off over paying the mortgage. I do 1/3 overpayment and 2/3 into a 4.2% cash ISA maintaining a few k in instant access savings and several k in past ISA accounts with instant access.

J_B.