Fixed rate or tracker mortgage?

mrso2b

My fixed rate has come to an end. Should I tKe out another fixed rate mortgage or go for a tracker mortgage? Ltv 75%.

kingstreet

What's the difference in the rates and fix/track for how long?

mrso2b

The interest rate on the tracker is lower, my question is really are the rates likely to go up shortly in which case it's better to go for a fixed rate deal?

kinger101

mrso2b wrote: »

The interest rate on the tracker is lower, my question is really are the rates likely to go up shortly in which case it's better to go for a fixed rate deal?

.

That's a bit of a crystal ball question. Rates almost certainly won't go up before next summer. I'd say over the next two years, it's also very unlikely that they increase by more than 1%.

kingstreet

How quickly will rates rise and how much will they rise?

Magic 8 Ball job.

"Cannot predict now" would seem the most likely answer.

You have to take the certainty of the fixed rate you are considering over the period it will run and try to figure out for how long and by how much rates will have to rise to erode the savings you're making on the tracker.

mrso2b

I can come out of the tracker at any time. Would it be worth taking it and keeping an eye on rates and fixing when I see them creeping up?

The deal on the tracker is 2.09 compared to 2.45 or 3.09 fixed for 2 years or 3.25 or 3.54 fixed for 5 years.

The tracker looks appealing to me cause it means our mortgage payments will halve what they are currently! Giving me lots of opportunity to overpay.

stator

If you wait until rates start going up the fixed rate deals will go up more than you might expect. eg if base rate goes up from 0.5 to 1.0 the fixed rates deals won't go from 3.25 to 3.75, they will go up significantly more because more rate rises will be likely. They set a 5 year fix based on what they expect to happen over 5 years and what might happen over 5 years, not purely based on the current rate.
Even if the base rate stays at 0.5 you might see fixed rate deals going up as it becomes more obvious that rates will rise in the future.
It's your gamble to take, no one can tell you which is better

mrso2b

Oh god it's so hard!!

getmore4less

Tracker and overpay.

AlexMac

getmore4less wrote: »

Tracker and overpay.

Agreed.

No one can predict absolutely, but based on almost 40 years experience of having had a series of mortgages, my gut feeling is... the lowest tracker you can get.

I bless my lucky choice - about 10+ years ago, to take out a tracker on 'base+ 0.75%'. Initially about 3-5%, it has, for the past 6-7 years been at a magical 1.25%, as base plummeted to 0.5% and has stuck there. I am optimistic that even if the bank rate creeps up the odd 0.25 or 0.5%, I'll still be well ahead!

At the peak in the late 80's, I was paying 12-15%! Think what that would do to your monthly repayments...

But realistically, it ain't gonna happen... certainly in the next 5 years. So IMHO go for a cheap tracker

katejo

AlexMac wrote: »

Agreed.

No one can predict absolutely, but based on almost 40 years experience of having had a series of mortgages, my gut feeling is... the lowest tracker you can get.

I bless my lucky choice - about 10+ years ago, to take out a tracker on 'base+ 0.75%'. Initially about 3-5%, it has, for the past 6-7 years been at a magical 1.25%, as base plummeted to 0.5% and has stuck there. I am optimistic that even if the bank rate creeps up the odd 0.25 or 0.5%, I'll still be well ahead!

At the peak in the late 80's, I was paying 12-15%! Think what that would do to your monthly repayments...

But realistically, it ain't gonna happen... certainly in the next 5 years. So IMHO go for a cheap tracker

I was also lucky. When my 2 year fix ended in late 2007/early 2008, i got a fee free base rate tracker. Initially it was about 6% but almost immediately rates dropped and, since March 2009, i have been paying 0.77% (base rate plus 0.27%). If someone had told me then that the same rate would apply in 2014, I would never have believed them ! Go for the tracker and try to make overpayments so that, when rates rise, you won't suffer as much.

I first bought in the early 90's just after the peak 12-15% rates.