2 year tracker or 5 year fix?

Burnley_Lad

As I've mentioned in a previous post, my wife and I have a meeting with a mortgage advisor in the morning. I can't sleep thinking about it, hence my post at nearly 2 o'clock in the morning! We both feel it's such a big junction in our lives, that we want to make sure we are making the right decision.

All along, my wife and I have been going with the firm idea that we would prefer to take out a five year fixed rate deal, currently being offered at 2.44%.

However, after looking around at some of the posts on here and recent articles elsewhere on the internet, we are now also considering a 2 year tracker, currently being offered at 1.74% (BoE base rate plus 1.24%).

The reason for this is we understand there is a possibility that there is a possibility that the BoE rate could decrease before the next rate increase. If this does happen, would the fixed rate deals being offered automatically decrease in line with the BoE base rate, or is this not automatically the case?

As a lot of people are predicting that the next rate rise is at least twelve or possibly twenty-four months away, we are a little apprehensive at fixing now if rates are not likely to increase any time soon.

Is there anything to stop us from getting a tracker rate now, benefitting from the slightly lower rate than the fixed rate, and in six or nine months time looking to fix when a rate increase looks more imminent?

sebtomato

Burnley_Lad wrote: »

Is there anything to stop us from getting a tracker rate now, benefitting from the slightly lower rate than the fixed rate, and in six or nine months time looking to fix when a rate increase looks more imminent?

When a rate increase looks more imminent, then the rates of the fixed mortgages will also have gone up. Therefore, if you want to secure a fixed rate mortgage with a good rate, you need to do it now (and personally, I wouldn't fix for less than 5 years, as the next couple of years may still have a low BOE rate anyway).

Debtslayer

Personally I would choose the 5yr fix at 2.44%
That seems a good rate to me. IMO
Then you won't havd to think about it again for another 5 years
Also if you went for a 2yr tracker you'd have to look at it again in 2yrs and factor in any mortgage fees that may be payable, so would it work out cheaper?

megaginge

I think fixing for 5 years right now is a sound idea. Likely to have rates stay low for 18 months to 2 years, but any forecast of rising rates will see mortgage market react. Fixing for 5 years 2 years from now is likely to be at a significantly worse rate...

Obviously all opinion mind you, and I might be completely wrong ...

csgohan4

I fixed for 5 years so I didn't need to worry about remortgaging and the fees associated with that. Also don't need to worry what happens career wise in between that might affect a mortgage

Thrugelmir

Burnley_Lad wrote: »

The reason for this is we understand there is a possibility that there is a possibility that the BoE rate could decrease before the next rate increase. If this does happen, would the fixed rate deals being offered automatically decrease in line with the BoE base rate, or is this not automatically the case?

You would need to look at the product details. Possible that there is a collar. Interest rates are negative in the EU. Japan and Switzerland.

GolfFoxtrot

I'm also remortgaging at the moment and going for a 5 year fix at 2.58%, main reason being that in 5 years time I should be below 50% LTV.

With our current mortgage the base rate reduced but our fixed rate did not change.

mrginge

Different circumstances but I just re-fixed for two years.
But starting out from scratch, with a relatively high level, then I'd probably place more importance on five years of stability than some maginal potential gain over two. Plus you've chipped away at that ltv by the time you're looking to remortgage.

megaginge

GolfFoxtrot wrote: »

I'm also remortgaging at the moment and going for a 5 year fix at 2.58%, main reason being that in 5 years time I should be below 50% LTV.

With our current mortgage the base rate reduced but our fixed rate did not change.

Almot identical circumstances to me... 75% product now, fixed for 5. Hoping to be close to 50% at the end of the 5, but then I'll likely also move in 5 which will push things back up in the wrong direction somewhat ..

Debtslayer

Hi Op
What was your decision?

csgohan4

If you have a high LTV i.e 95% and property prices increase by 5-10% a year in your area definitely consider shorter deals rather being stuck on a high interest mortgage.


This so you can re evaluate our LTV and hopefully it will make a bigger difference on your repayments