Opinions on mortgage offer please

ourcornercottage

Okay I've rang hsbc today for the best deals I can access.

I have a house valued at about 300000 - 320000.

I have 2 mortgages

1, about 36000 lifetime tracker on interest rate of 2.14% 13.5 years left
2, about 101000 lifetime tracker on interest rate of 2.69% 18.5 years left

There are a few options....

Pay £299 fee and put both on 1.99% lifetime tracker (savings in monthly payment will pay back the fee in 6 months in current rate)

Leave mortgage 1 as it is and put mortgage 2 on a free free tracker at 2.49% (will do this at the minimum as its a no brainer)

Leave mortgage 1 as it is and put mortgage 2 on a 2.49% fixed for 5 years with a fee of £299. Mortgage 2 can only be OPd by 20% per month but mortgage 1 will have unlimited OP's

I'm thinking the last one has benefits of some security. I am a little limited with other suppliers as I am a company director and it's a bit more difficult to access the better rates.

Opinions please....

pinkteapot

Personally I'd go for option 1 as a six-month fee payback period isn't bad, but then I'm a big fan of lifetime trackers and don't mind the interest rate risk that comes from not fixing. I'd also prefer one mortgage to two!

Can you extend your term? Could you do option 1 but with a longer term, so for security you have lower basic repayments, then overpay more while the base rate is still low?

Re fixed vs tracker:

The base rate normally goes up 0.25% at a time, so you only need two base rate rises to make the tracker the same price as the five year fix, and three for it to cost you more. But, how long will those three rises take? How much will you save in the meantime?

When they start increasing rates, my view is that they'll do it pretty slowly as the recovery certainly isn't solid yet. There was some talk of a base rate reduction recently, following the weak inflation data, though I'm not convinced it will materialise.

Ultimately, fixed vs tracker comes down to your attitude to risk and your view on what the base rate will do. It's a gamble. Some info here:
http://www.telegraph.co.uk/finance/personalfinance/interest-rates/11032396/Interest-rates-predictions-When-will-the-Bank-Rate-rise.html

As I've said on other threads, when fixed rates are so low, I take it as suggesting that the economists who work at the lenders think rates aren't going anywhere fast, and it makes me less inclined to fix. But, as the article above says, a lot of people would see fixing as sensible as you get security for little extra per month...