48k Mortgage Tracker or Fixed Rate? (Repayment)

Keith:)

Hi,

My 2 year fixed rate is up in Oct which was a very good rate, now interest rates have gone up I am considering a tracker mortgage for the first time, does anyone know if there is actually much difference between a fixed or tracker mortgage?

So far these are the products I have found and will be calling each of them on Tues... I am currently wih A&L but they seem to have some really high Product Fees with a review fee for renewals which seems silly to me?

Vendor_Term__________Percentage__Term_______Product_Fee__Review_Fee
A&L____2_Year_Fixed___4.99%______30/09/2009__2,999________250
A&L____2_Year_BRT____5.44%_______2_Years____1,499_________250
A&L____2_Year_BRT____5.59%_______2_Years____599___________250
A&L____2_Year_Disc____5.55%_______2_Years____599___________250
C&G____2_Year_Fixed___5.29%_______30/09/2009__?
C&G____2_Year_Tracker_4.99%_______30/09/2009__?
Sorry about the above table its the best I could do to get it to insert with spacing...


As with all I would love to pay early however I have a 3y.o and a 1y.o and I am the sole earner... so looking at a 20 year term (current term 25) 15 is tempting as payments seem to be £60pcm difference but would it really make that much difference?

Any advice would be appreciated, will see what both vendors have to say tomorrow!

homer_j_3

First of all, you need to understand the differences between a fixed rate and tracker.

Secondly, you do not mention size of mortgage so its impossible to say which will be better.

Thirdly, we do not know income so unsure if both will lend to you.

Lastly - there may be othe lenders out there that offer a better deal than both A&L and C&G,

Your table above is like comparing apples and pears - with the odd orange thrown in.

Gorgeous_George

It's £48K (from the thread title).

I think you need to decide how soon, after taking this next deal, you intend to change again. £2,999 over two years is a significant additional cost of borrowing; over twenty years it's not so bad.

Personally, I'd go for a lifetime flexible tracker with no upfront fees. I'm with Britannia at BR+ 0.74% but there others (Nationwide, for example, is cheaper but may not be flexible).

With a tracker, what you pay changes every time the base rate moves. I expect many BR trackers to be replaced with SVR trackers so securing one now could be a good move. Thre flexible part means that you have a savings account that 'earns' the same interest as the mortgage rate, tax-free (that's not quite how it works but isn't far off).

If you go for a fixed term deal, go for a minimum of 5 years.



GG

HappyHammer05

My £49k fixed rate mortgage with the Nationwide expires too in Oct. My FA has advised me to use C&G tracker (0.17% above base rate) its variable but with no fees whatsover and the options for over and under payments. Also no tie-ins so if rates do keep rising there is the option to bail out and go elsewhere for a fixed rate. He did however tell me to take out a £50k mortgage to qualify for the no fees etc and then pay the extra as an overpayment to the new mortgage. Trust of some help.

MarkyMarkD

The A&L review fee of £250 is less than the £295 MEAF you would pay if you redeemed. This is different to Northern Rock where the MEAF of £250 is lower than the review fee which seems to vary between £295 and £395 depending what mood they are in.

Anyway.

You can get a BBR+0.99% lifetime tracker from A&L with no fees at all. Given the relatively small size of your mortgage, you should at least consider that option as it's a lot less hassle than remortgaging elsewhere. It's also fully flexible so you can over-pay as much as you like and then take payment holidays/under-pay as necessary (within your overpayment balance).

Paying £849 for the A&L 5.55% discount would save you roughly £1,100 in interest compared to the 6.74% A&L lifetime BRT, so it's just about worth it as long as you don't intend to redeem during the 2 years. Both are fully flexible, but the 2 year discount would have an ERC if you redeemed.

The Woolwich lifetime trackers are also very good value, depending on your LTV

homer_j_3

sorry - didnt really read the title.

With such a small mortgage, I would be looking at paying as little or none at all fees for your next product.

If your next product is going to cost you 2k, you will have to save £83 roughly per month in comparisone to a fee free deal (and thats without the exit fees etc.) It is highly unlikely you will save this amount so you will need to look at fee free deals or little fees.

Keith:)

Thank you all for your advice, I really appreciate this, the value of my home is just under £250k so finding another lender should not be an issue. I apologise for not putting the 48k loan required in the post!

There are some interesting points, I will look into a lifetime tracker does it work on the normal up to 30 years? I assume this option could be bad if the interest rates go up beyond 6%? I understand it levels out eventually because you never incur charges for swaping mortgages which I have read recently.

The C&G base rate option sounds good espcially as you can pay back the money I dont need to make it upto £50k, another option for me to investigate tonight when the kids are in bed!

Again thank you all for your advice, I will be thanking each post, any other ideas or advice please keep it coming... I am keen to investigate all posts here and will do so tonight so I am armed for tomorrow! Thank you

Will post back with what I find...

UK007BullDog

No one knows where rates will head to.
As with a young family and the sole income would it not be better to know exactly what your outgoings are going to be for a set period. I would suggest you also look at some 5 year fixes.

HappyHammer05

Keith, just be aware that not all deals are available to you direct. Special offers/deals are sometimes reserved for Independent Financial Advisers. So may be worth going down that route but please check that they are independent!! Also worth haggling with the financial adviser if they insist in charging you a fee for the mortgage business - be aware that they get commission from the mortgage provider for providing the business so they could offset the charge if you haggle hard enough (worth a try!).

Gorgeous_George

Britannia (clicky) offer free conveyancing, free valuation and no early repayment charges with an off-set mortgage at BR + 0.7%. Borrow £50K over 25 years and repayments would be £336.04.

Invest the additional £26K in the attached savings account and let the 'interest' from the £26K be used as an overpayment will see you finish paying your mortgage in less than 8 years (by using the £26K to pay the final part of the £50K mortgage).

Britannia is a building society and pays a 'dividend' after two qualifying years.



GG

Keith:)

UK007BullDog wrote: »

No one knows where rates will head to.
As with a young family and the sole income would it not be better to know exactly what your outgoings are going to be for a set period. I would suggest you also look at some 5 year fixes.

You are right, knowing the exact outgoings is great, but I had a 5 year FR about 4 years ago and the interest rates went well below whilst I was still paying a high interest rate comparatively, I did know what my outgoings were but didnt feel great knowing I was paying much more than others...

Just in case you think how did he have a 5 year fixed rate 4 years ago and now have a 2 year fixed rate, I paid off my mortgage in full when my Mother passed away, we then started a young family and needed a bigger house so we had to take out a mortgage to move and start again on the property ladder.

I am going to research options and may get in touch with my old IFA, he was very good previously