Tracker mortgages when the base rate rises

DreamerFTB

marathonic wrote: »

Just the mortgage closure fee of £125 from my previous lender.

sorry I meant the expenses during the internal switch in first direct, from the no fee one to the fee (avoided because you were customer already) 1.79% one. Did you have to do another valuation for example? And how long did the full process take? Thanks!

Amy56

marathonic wrote: »

The best rate is actually 1.79% with a £950 fee with First Direct.

There is no fee for this product for existing mortgage customers. I recently remortgaged to their higher rate, fee-free, tracker and, upon completion, immediately switched to the 1.79% rate - so, effectively, I'm on a BOE Base + 1.29% lifetime tracker with no fees.

I'm very interested in this, as I'm awaiting a phone interview to remortgage to First Direct for exactly the product you mention!:)

Did you tell the mortgage advisor your plans from the outset? I guess the only gamble is if the lower rate is still around by the time I complete? If I end up with the higher product, then that means I've remortgaged for nothing as I can get a better rate with my existing lender.

Just as I think I've got it all clear in my head, I read another option!:eek:;)

jamesd

It's likely that you will be able to get a similar premium over base rate in the future. Not much need to worry about that.

If you're concerned about interest rates rising go for an offset mortgage. That way you can shift money into the offset account to reduce the interest bill during times of high rates and out again at low rates.

getmore4less

Coventry have a flexx variable lifetime at 1.89%, offset 1.99%
(Probably not base rate tracker).

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Base rates have been low for 6 years(March2009)

Margins on all rates have been getting lower since then(after the initial scare rises early on).

at the start margins on 2 year fixes were around 2.5%
I think the best around June 2009 was
June 2009, FD 2y fix 75%LTV £1500 fees 2.99%
there current offer
March 2015 FD 2y fix 75%LTV £950 fees 1.79%

average 2y fixes on offer were even higher one report has 5%

5 years fixes were around 5% and up at that time. now around 3%

Around that time some lenders had SVR lower than their own fixes

same has been happening to trackers the margins have been getting smaller.
around the end of 2009 the best was FD at base +2.08% others were around base + 2.5%

you cannot use the historic margin when bases rate were at 5% to tell you anything. You also need to look at other factors like fees as well as marker conditions.

Just have a read through old news articles plenty of historical references.

The rates can only go up fix now message has worn so thin most people can see through it.

Once your LTV gets sensible a tracker is nearly always the best option.

Jhoney_2

bigheadxx wrote: »

Best deal I have seen is Santander lifetime tracker at 2.39%. Fee is £495 for account holders plus you get cash back on mortgage payments which reduces effective rate for me to bbr plus 1.6%. 75% LTV better than most.

I am with them currently and just starting to research my options with them before I see a broker for other possible lending options...

Is the tracker option better soley as you have the ability to overpay and no ERC? I have never had a tracker and have no idea! I am risk shy so missed all the good rates of recent years etc by fixing.:o

So e.g the payment and cashback etc are the same for the 5yr fixed.

PS LTV below 60% so potentially eligible for the decent rate products.

jamesd

Trackers tend to be cheaper, at least according to a Canadian study some years back that found that routinely going for fixes had proved more expensive. A range of reasons including he inevitable cost to the lender for buying the money for a fixed rate and term that gets passed on to the customer at the regular renewals. The tracker customers meanwhile just carry on without ever having to pay another fee if it's a life of mortgage deal.

Now is a time when a longer term fix in the five or ten year region might actually be a money saving idea. We're not in anything like normal conditions and the usual experience won't necessarily apply at the moment.

sophieev

I am with Santander - base + 2.19% and am looking at switching to the Coventry flexx variable lifetime at 1.89% (mentioned above).

The Coventry flexx is most definitely not a base rate tracker. In theory they can change the rate to whatever they want, whenever they want, but my research so far suggests that Coventry have historically only done this in line with base rate movements. That is no guarantee for the future though.

Decisions, decisions........

Rollinghills

We are going for 10 year fix with nationwide at 2.89%.

I am convinced the 10 year rate cannot get any lower. The current treasuries 10 year bond yield is 1.94%. That means we pay just 0.95% more than the UK government on a 10 year loan! (banks got the money when the 10 year yield was 1.5% a few weeks ago but of course they can't borrow as cheaply as the uk government). That is better than any lifetime tracker available. We looked at the lifetime tracker option but I think 2.89% for 10 years is too good to miss. Just hope the mortgage goes through.

marathonic

Rollinghills wrote: »

That is better than any lifetime tracker available. We looked at the lifetime tracker option but I think 2.89% for 10 years is too good to miss.

Time will tell. For now, my Lifetime Tracker is saving me 1.1% per year over the 10-year fix. Of course, rates will rise - the question is 'when and by how much'?

For example, the following is one of many possible scenarios for base rates:

2015 0.5% (tracker saves 1.1%)
2016 0.75% (tracker saves 0.85%)
2017 1.0% (tracker saves 0.6%)
2018 1.25% (tracker saves 0.35%)
2019 1.5% (tracker saves 0.1%)
2020 1.75% (tracker loses 0.15%)
2021 2.0% (tracker loses 0.4%)
2022 2.0% (tracker loses 0.4%)
2023 2.0% (tracker loses 0.4%)
2024 2.0% (tracker loses 0.4%)

The above scenario works out cheaper overall for the tracker - especially when you consider your outstanding mortgage is at it's highest when the rate is at it's lowest.

The above assumes a new norm of 2% - which many are predicting. Of course, some are now predicting that rates could even drop before they increase. There is also the possibility that rates will rise significantly faster than the above.

Noone knows what they're going to do but it's totally wrong to say that a 10 year 2.89% fixed rate will be a clear winner over a BOE + 1.29% lifetime tracker rate.

In addition, you have to consider your options at the end. If your mortgage, for example, is too low to be worthwhile/permitted to remortgage, you could be stuck on an SVR for the remaining term. With the lifetime tracker, you have secured a good rate until the end of the mortgage.

Rollinghills

Sorry I was talking about the implied margin of 1% being the best.
Of course there is no certainty a 10 year fix will work out cheaper than a tracker. If there was there'd be no other mortgages sold.
I'm happy with it for our peace of mind but of course it is not for everyone.