Is it stupid to go for a tracker mortgage?

MsWow

Hi everyone,

I hope I'll get some advice from you.

We are looking to take a mortgage and we are debating about the tracker-fixed options.

We are going to apply for a mortgage and by looking at the monthly payment the tracker is almost £200 cheaper. We would overpay the difference just to clear the capital (as we do now with the current mortgage).

Is it a bad idea to go for a tracker or should we stick to a fixed mortgage? The interest rate difference between those to product is 1.5% more for the fixed mortgage?

Any advice or thought is well appreciated.

Thrugelmir

Remember a mortgage lasts for many years. So there's wider considerations than just current interest rate to consider.

tgon

I've been happy with my HSBC tracker for the last 6 years especially with interest rates so low for so long.

MsWow

Thrugelmir wrote: »

Remember a mortgage lasts for many years. So there's wider considerations than just current interest rate to consider.

Right. So what should we take into consideration?

kingstreet

1.5% difference between a tracker and a fix?

Over what period are these products?

AFAIK there certainly isn't a difference that size between a two year tracker and two year fix.

Keekles

How long are you fixing / tracking for?

What are your thoughts on interest rates; how will they impact on your repayments?

What's the most important thing to you? The cheapest rate, stability of repayments, budgeting?

No one can answer for you and no one can really advise, but as Thrugelmir suggests; it's a long term loan with a lot to consider in both short and long term.

squeeks

Most fixed term mortgages only last 2-5 years before going on to a SVR. SVR is probably more risky than a tracker.

As long as you aren't locked in and can move provider in a 2 - 5 year time frame I don't think there is anything horribly wrong with a tracker. Compared to any other mortgage.

You are taking the gamble that the interest rates will stay lower than the fixes over that time frame. After the lock in period everyone is taking the same gamble, until they take on another fixed rate product.

Providing you aren't stretched and can afford potentially increased repayments soon (by the £200 difference a month, plus possibly a bit more to be safe), should things start to get interesting you'll be as fine as any other mortgage holder.

Keekles

squeeks wrote: »

Most fixed term mortgages only last 2-5 years before going on to a SVR. SVR is probably more risky than a tracker.

Trackers are no different in terms of how long they last; unless you can find lenders offering lifetime products still.

MsWow

tgon wrote: »

I've been happy with my HSBC tracker for the last 6 years especially with interest rates so low for so long.

Our current mortgage is a tracker and it worked perfect for us as it offer the flexibility we needed. We've overpaid a lot and we were able lower our LTV and apply to even better tracker. But considering the strong british economy I wonder if a tracker will still make sense these days.

Are people still go for trackers or everyone want to fix these great interest rates.

MsWow

kingstreet wrote: »

1.5% difference between a tracker and a fix?

Over what period are these products?

AFAIK there certainly isn't a difference that size between a two year tracker and two year fix.

One is a 5 year fixed and one is 2 years tracker.

squeeks

Keekles wrote: »

Trackers are no different in terms of how long they last; unless you can find lenders offering lifetime products still.

I haven't seen the limited term trackers. But then again I haven't been looking that hard at mortgages. Firstdirect trackers are for the lifetime of the loan, there fixed rates seem to be 2 or 5 years.

As with all these things, speak to a mortgage broker or two and do some sums.