Does any one takes tracker or SVR?

movilogo

I am just wondering how fixed rate is better over tracker or SVR?

Most people take fixed rate for 2-3 years. During this time, rate will be slight over base rate anyway. But if base rates goes down, then you're at loss. So, it only protects from base rate rising during deal period. But once it ends, then again you have to re-mortgage and again will you'll get a new fixed rate which will be again slight over than base rate.

So, fixed basically protects you from base rate rising during deal period only.

So, still why most people run after fixed rate? Is it really better consider Early Repayment Charge as well?

Or I missed something else important?

kingkano

You missed the most important facet. Forget the rate!! Fixed rates are really for people who need to be certain of their outgoings. The main benefit is that for 2+yrs (upto 15 or 25) you know exactly how much your mortgage payment will be every month. You can budget around this knowing it won't change during the fix period.

The trouble I guess is people get 'stuck' on the idea of fixes. When their fix runs out, they run to the next fix. To be fair someone who fixed 2yrs ago has been laughing for 2yrs. If they fixed for 5 or 10 they are still laughing all the way to the bank.

SVR will never ever be worth taking. Its usualy 2-3pts above the base rate. Lenders will always have some kind of discounted SVR that will be worth taking. In the current climate quite alot of people probably are taking trackers, and I certainly know quite a few people who would rather take a tracker now.

OR take the best of both worlds. Get a 'capped' rate. Its guaranteed not to go above x% (the cap) thus giving you the benefits of fixed in that you know your repayments won't go above a certain value. While at the same time you'll benefit from any falls in the base rate (however unlikely this is).