Nationwide Tracker or 3 yr fixed

heavysnow

Hi - I hope some of you can help me with this. My wife and I have a 2yr fixed rate mortgage with Nationwide that comes to an end at the end of this month (October 2007). The mortgage was for £136,000 at 4.39%(ah - those were the days !) paid back over 25 years. The amount owed is now down to just under £131,000. The mortgage payments are currently around £751 per month.

Now, since January, I have become self-employed (I.T. work) so I am aware that there is no point trying to get a new mortgage deal with a different lender as I have less than 1 year of accounts. Ideally, we want to get a fixed rate for around 3 years or so - the Nationwide 5 year fixed rate no-arrangement fee deal is just a bit too long for us. So, we have 2 choices with Nationwide at the moment. The first is the 3 year fixed rate at 6.08% (£499 arrangement fee) which will mean monthly payments of around £880. The second choice is the lifetime tracker at 6.09% - similar monthly payments but no arrangement fee. The advantage of the tracker is that we can switch to any Nationwide fixed rate product at any time with no penalty. This would be great if interest rates come down but very annoying if they go up! We could manage a few more interest rate hikes but it does look more likely they will fall or stay static for a while.

I know this like crystal-ball gazing but I have been finding it really difficult to decide what to do and I'm just looking for a bit of advice really - anything greatly appreciated!

Many thanks

heavysnow

Any help greatly appreciated

Nailer99

Hi Heavysnow,

Noone can predict what'll happen with certainty. Many pundits are saying that interest rates will come down, but it isn't guaranteed. I just chose a tracker mortgage on that basis, but I can still afford the repayments even if there is a substantial interest rate rise. If the possibility of higher payments scares you, go with the fixed rate one.

Nailer99

By the way, try using a mortgage broker. They may well be able to find you a better deal than you can find on your own and if you use a fee-free whole of market one, there's nothing to lose (see Martin's guide on the subject).