Lifetime tracker mortgage advice

chick21

With all the news of rates moving up, I was wondering if it was worth changing up to a fixed rate.

Currently we are on a lifetime tracker from HSBC on a variable rate 1.69% above the BOE base rate at 0.5% giving a current payable rate of 2.19%. This is a capital repayment loan, 20 years left (25 taken in 2010), £104,572 remaining.

There are no early repayment charges and unlimited overpayments. Current monthly payments are ~£545 PCM.

When checking on comparison sites I can't see any which we would be better off with, but might be missing the point? We would be grateful for any advice.

Caladan

'When will rates come up' is the same as asking 'how long is a piece of centrally controlled string.'

No one, on this forum or anywhere else, can answer that question. A lifetime tracker rate of 2.19% is pretty good in the market but not the best you can get (depending on your loan to value).

A fixed gives you security for a few years, and interestingly many fixed rates are currently lower than many tracker rates. The downside is that you might not be able to get the same margin over base as you have now when the fixed expires (for example HSBCs variable after a fixed rate ends is a relatively higher 3.94%).

getmore4less

Look at the followon rates of any fixed.

Look for the best tracker rates to see ifyou can better + 1.69

You have to factor in change fees.

Circumstances can change so changing in the future is harder.

Then it is an assesment of where you think rates and fees will go.

eg a £500 fee on a 2y fix on your current details.
2 years paying £545pm

£104572 @ 2.19% £545pm in 2 years £95892

for £105072 to get to the same amount(break even) rate needs to be 1.936%

I think you have a good rate and any short term ggain could well get wiped out.


Best protection against rate rises is borrowing less and at that rate you can probably find savings to match(which should track up as well) so overpay/save if you can.

chick21

Thanks for the responses. More recently we've been paying £100-400 extra a month where possible, interest has been ~£200.

Not sure if it makes a difference, but property was bought at £347k and currently around £573k. It has been bouncing around +\- £50k. Some people have talked about remortgaging on a lower LTV, but from what I understood when I took out the mortgage I was already in the lowest bracket?

TrickyDicky101

I would kill for your mortgage deal. Unless you absolutely must have the assurance of a fixed rate, then I would stay as you are.

getmore4less

LTV is allready below the best on offer so ask those that are telling you where these special deals for your new LTV are.

if you can keep the overpayment at £100+ you don't NEED to fix.

the more you overpay the more you save and can take a rate rise.

A payment of £645 will cover a rate of 4.2% a base rise 2%, if that happens quickly there will be a lot of people with problems(not you).
£200pm cover upto 5.93%

submarine76

I'm on a tracker currently at 1.99 and am loathed to switch because of the extortionate fees and the loss of flexibility regarding overpayments. If you are comfortable with the rates rising I would stay put. Could be a long time before you get a deal that that again.

sebtomato

getmore4less wrote: »

Then it is an assesment of where you think rates and fees will go.

eg a £500 fee on a 2y fix on your current details.

I think it's pointless to do a calculation over 2 years, if there is 10 years left on the mortgage, and they are unlikely to be able to repay it before then.

The calculation fixed vs. tracker over the first 2 years is misleading, since they won't be able to find another cheap fixed mortgage in 2 years' time, and then will pay significantly more than their tracker, as the mortgage would typically move to a variable standard rate.

marathonic

sebtomato wrote: »

and then will pay significantly more than their tracker, as the mortgage would typically move to a variable standard rate.

Trackers may be available at lower margins above base rate by the time their fixed rate ends so there's is no definitive answer as to which is the best option.

Thrugelmir

marathonic wrote: »

Trackers may be available at lower margins above base rate by the time their fixed rate ends so there's is no definitive answer as to which is the best option.

Is it worth the gamble though? My feeling is that the rates of the credit boom years are unlikely to seen again. Life support is shortly going to be turned off. The USA being the first.

Over time interest rates are going to rise. So there's never going to be a better time to repay debt. That's were the focus should be. Rather than rates themselves. As it's the saving over the entire mortgage term that matters. Chasing rates is like tossing a coin. Win or lose.

getmore4less

sebtomato wrote: »

I think it's pointless to do a calculation over 2 years, if there is 10 years left on the mortgage, and they are unlikely to be able to repay it before then.

The calculation fixed vs. tracker over the first 2 years is misleading, since they won't be able to find another cheap fixed mortgage in 2 years' time, and then will pay significantly more than their tracker, as the mortgage would typically move to a variable standard rate.

You have to do the comparison over the period chosen(if you take a fix). thats the critical period where you have a known if you fix.

You then look at the follow on from that point where nothing is known

There are more options than just taking the followon rate, unless your circumstances change( a risk you put in your analysis), ther may be futher fixes and other tracker option to move onto.