Tracker or fixed 2yr/5yr, job changes in future

richy4

Fixed or tracker mortgage? Which is the best given today's low interest rates, which apparently aren't going to get any lower now.

My interpretation at present is that rates can only really go up from now on, so it would make sense to grab a fixed term for at least 2 years, up to 5 years max? I am a first time buyer buying a new build flat and around the 5 year point would hopefully be looking to sell and move on to a house taking any equity built up with me.

Another consideration is in my current role I am on £40k and this will rise every year by £2k over the next 4 years on the current pay progression scales. However, there will be the opportunity for an internal promotion to another role which pays significantly more over £60k next year. The key part of this however is that the training for this role would see my pay drop to about £20k for between 2-3 years during the training and then eventually to £60k once training is complete and verified.

In light of this, I am concerned should I be lucky enough to get the promotion then if I took a 2 year deal I would be scuppered to get anything when remortgaging comes round on £20k salary if I went for a 2 year fix, as opposed to a 5 year fix. Loan amount is £190,000.

In my situation, what would you guys do? I think the most logical answer is go for the 5 year fix as this should cover the period of changing pay and also bring me to the time when I ultimately want to sell up anyway!

dimbo61

Brown bread or white ?
Wholemeal or plain white ?
Thick sliced or thin !
What fits one persons needs may not suit another !
Now you are a first time buyer and you are also buying a flat on your own ! So what happens if in 2/3 years you have a partner and a second child on the way?
I have had a 5 year fix and when rates dropped to 0.5% I was stuck on a 4.74% deal.
However it was an offset mortgage and we were happy to wait out the fix and drop onto a tracker deal afterwards.
maybe an offset might suit your needs but consider carefully your long term plans

Thrugelmir

Borrowing £190k on a potential income of £20k would suggest that fixing your outgoings should be a priority. As the downside simply isn't worth the gamble.

richy4

In light of this: http://www.thisismoney.co.uk/money/mortgageshome/article-3595592/Mortgage-borrowers-trapped-EU-rules-cut-lifeline-affordability-checks.html

Does this mean in future where your existing lender would allow you to switch onto another deal/product with them with no further affordability checks that this will no longer be permitted?

So if customer with Nationwide has a mortgage deal for 2 years and then comes to remortgage again at end of the 2 years, they have to go through all the checks and affordability again, likewise any lender for anyone at any time?

csgohan4

I took a 5 year deal so I know how much I am paying for the next 5 years and if I need to change jobs, I won't need to go through the whole affordability issues again, at least not for another 5 years.

But Interest rates will be higher of course. If you want lower payments, fix for 2 years, but no guarantee interest rates won't increase after this period.

dimbo61

Think you have already answered your own question.
I would however overpay every penny possible or build up savings while earning Good Money for the times when you are training !

getmore4less

have you worked out how long it will take to recover your drop in pay.

3y training £20k(net £50,400) or £40k £42k £44k(net £95,200)

down £45k
y4 £46k(net £34,200 £60k(net £42,300)

5+ years to recover

and probably longer if you through the extra cash at the mortgage.
run some numbers with overpayments to see how long to need to break even.

If the new job comes with similar pay rises then you may recover more quickly.

erin110

Just to double check, have you had a decision in principle done yet ? If you are applying for this loan alone the £190k borrowing seems a bit high. The amount you can borrow depends on your outgoings, the loan to value and the term you take the mortgage over. I think with the most generous lenders, over their maximum term, with no commitments applying on your own, on a salary of £40k will probably only get you £180k.

getmore4less

hope so they have exchanged.

https://forums.moneysavingexpert.com/discussion/comment/71966690#Comment_71966690