Changing lifetime tracker to 5 year fix

Emmalou

I am getting cold feet about staying on my lifetime tracker with all this talk of interest rate hikes.

Although next spring is thought to be the most likely time and is quite a way away, I am worried that if I leave it too long to fix, all the rates will have gone up.

My present tracker is 1.89% above base and I am thinking of staying with my current lender and paying £499 to move to a 5 year fix @ 3.19%

My mortgage is 200k and my LTV is about 55%

Has anybody been in a similar situation and what did you do?

Does anybody think I would be crazy to chuck in my tracker?

getmore4less

Work out your payment as if it was at 3.19%

Up your payments to that and overpay by £499 now.

you are then paying out the same as if you changed but reducing the capital quicker.

IMO if the rates go up this will be slow, so start overpaying and that will protect if the rates base rates go up by 1.25%.

dimbo61

The INTEREST you are now paying on your mortgage at 2.39% is about £400 a month.
If you went on the 5 year fix and added the £499 to the mortgage debt the INTEREST would then cost £533 a month.
You have not given your term so we cannot work out the repayment cost each month.
It would take 2 X 0.5% Interest rate increases before you are worse off or a 1% Increase.
If you need the security of a long term fix ?

amnblog

If it is worrying you and you can afford the new payment rate, switch to the fixed rate and stop worrying.

Emmalou

Thanks Dimbo, that has given me food for thought. My term is 16 years by the way.
I'd certainly rather use the booking fee and extra interest payments to reduce my capital rather than line the bank's pockets!

Thank you amnblog - you are absolutely right. Only trouble is I will probably worry what ever decision I make!

getmore4less

current mortgage 1. £1255pm, proposed 2. £1335pm (adding fee)

after 5 years paying £1335 on both

1. £140,367
2. £148,403

So up to £8k is the cost of the security of the fix the longer your rate stays below the 3.19 the higher it can go over 3.19% to break even over 5 years.

What is the follow on rate of the new deal as if you would need to change again in 5 years that eats inot any saving the fix may give you if rates rise a lot.

dimbo61

You have a very good lifetime tracker! and the BOE talk about interest rates going up slowly over the next 2/3 years.
It would really hurt a lot of mortgage customers if rates went up to 4/5% in the next 2/3 years.
Many many people would lose there homes with a squeeze on wages ( no pay rises) Inflation at 2/3%, taxes etc
The 5 year fix will I guess after 5 years revert to the SVR of 4.99% or more and it is up to the lender if they want to up the SVR
Stick with your tracker and either build up savings in ISA,s or overpay YOUR CHOICE

Emmalou

Thank you for your replies. I think I am leaning towards sticking with the tracker and overpaying to reduce the capital to cushion any future rate rises.

With the news about inflation falling today, I believe this delays the likelihood of interest rate rises.

Thrugelmir

Emmalou wrote: »

Thank you for your replies. I think I am leaning towards sticking with the tracker and overpaying to reduce the capital to cushion any future rate rises.

Highly possible that you'll never get such a good rate again in the future. So as you are suggesting. Make hay while the sun is shining and pay down the debt. It's the only sure way of coming out on top. No one can forecast future direction of interest rates. However from where they currently stand upwards is the only way they are going.