Five year fix or stick with tracker

Johnnybegood

I'm currently on a lifetime tracker @ 2.29% (2.79 including 0.5% base rate). I took this out in November of last year and pay £979 a month). The fee was £995. This was with first direct. First direct now offer this same mortgage but the fee has increased to £1499.

I'm really tempted by one of their 5 year fixed rates at 2.99% with no fee. paying just over £1000 a month.

I'm really confused however. Part of me thinks that I should stick with my current tracker mortgage as I paid £995 for it only 7 months ago and the fact that first direct have now increased the fee makes me think that I got a good deal and maybe the banks no something i don't. However the fact that I can fix for 5 years for and extra £20 a month and no fee is very tempting, any ideas or suggestions gratefully accepted

dimbo61

No one on here knows much about you !!!
Job, age, income, kids , savings, plans
The tracker is very good but that 5 year fix is also very good
It would only need one 0.5% increase in base rates and the fix is the better deal.
It does give you 5 years security and the chance to pay down some of your debts.
If interest rates do climb your biggest debt is fixed and you can build savings in cash ISA,s

gazter

if interest rates do rise in yr 4 of his yr5 deal, whats the chance he'll get offered a tracker at such a good rate again?

If interests rates do go up, by sticking with your lifetime tracker you are going to always have pretty much the best rates, the only people who will be better are those in a fixed rate taken out before interest rate rises looked better, they'll soon end.

just my few pence worth. Im on (or about to be) a 4 half yr 2.89% fixed deal, i would swap it for your lifetime tracker.

dimbo61

I took out a 5 year fix ( offset) and during the 5 years we paid off nearly 60% of our mortgage debt.
I did not want to take the risk of rate rises when we first got the mortgage and managed to overpay and offset to reduce the debt.
I always had a plan to have a short mortgage term and overpay so reducing the amount of interest we paid

Johnnybegood

thanks for your comments guys, I'm still pondering......

MarkBargain

If interest rates go up, as gazter wrote, after the 5 years you'll be paying a higher rate than if you stuck to your tracker.

If interest rates don't go up, you'll be paying 0.2% more for nothing.

It's looking unlikely rates will go down, but you never know.

Just based on the rates I'd stick with what you have if I were you, without knowing your circumstances or the overpayment limits / T&Cs of the mortgages etc.

Gizmo247

I'm on that same tracker FD rate and I went through the same thought process. I decided that there was a risk that, in the 5 years, the fixed rate might have been a better deal but that after that the tracker would win for the rest of the term.

I'm sticking with the tracker as I'm making large over-payments on the mortgage so the effect of a rate rise diminishes (should be all payed off next year anyway, 15 years early). My strategy then is for the mortgage to become a low cost loan vehicle and disaster fund.

originalmiscellany

It depends on what your long term game plan is. If in 5 years you are going to be able to clear a load of debt off your mortgage?

Gizmo247

I notice you (OP) have quite a sizeable long term loan at 8.4% so maybe you should factor that it the equation and try to calculate risk and cash flow. You should certainly be focusing on clearing that before any mortgage over-payments.

kidmugsy

Johnnybegood wrote: »

Part of me thinks that I should stick with my current tracker mortgage as I paid £995 for it only 7 months ago

Put that out of your mind - that money has gone. The only question now is what it is best to do next.

DannyboyMidlands

I've been toying with a similar decision.

Currently on 1st Direct lifetime tracker @ 2.89%.

Have just switched to 1st Direct fee free 5 year fixed @ 2.99%.

I plan to pay the thing off in that 5 years, so effectively fixed for the rest of the term.