Nearly decided on mortgage need just a bit more help...

moneylover

It is hard to decide between fixed and tracker rates. After posting on this board last week my son has decided to go with a BoE tracker in the hope that rates will come down. He has picked two excellent possibilities.

One mortgage is the Britannia 2 year tracker with no tie in at all . £499 in fees and rate of 5.8%
http://www.britannia.co.uk/mortgage/tracker/2_year_discount/index.html
This is a really good deal if rates come down because if/when fixed rates drop my son can jump into a five year fix which is what he would prefer anyway if such fixes were lower than they currently are. But I wonder - is Britannia expecting that a) fixes wont get much cheaper over the next two years or b)that if they do they expect to have a fix competitive enough for their customers to jump into that? I can't see that they can make much money out of this package as most people are going to spend the two years of the mortgage looking around for a better deal so their options arent limited to what happens to be around two years hence when the rate reverts to variable.

The second possiblilty is a Nationwide lifetime tracker - its 5.99% with no fee. You can move to a fixed rate at any time but only with Nationwide.

My son thinks that the Britannia deal is a no brainer. I think he is probably right - its just that I think the lifetime tracker gives more breathing space (as long as BoE doesnt climb) if good five year fixes just arent around in the next two years because of the longer term effects of the credit crunch. I know that he can only move with the Nationwide product to one of their own deals but they are as competitive as any I feel- if not so good one month, better the next.

If fixes are very likely to drop in the next year or 18 months then he would be right to go with Britannia and be able to pick from right across the market over the next two years.

There are some wise heads on this board and I am struggling. Any views would so be welcomed.....thank you very much.

sarkin

I always think in the case of first time buyers the should take a fixed rate. Its not the case of if rates go down. Its can your son afford the payment if rates start to rise.

Dan_Collins_2

I agree with with sarkin to a point, without knowing his affordability its hard to say.

Fixed rates could come down, however finance companies will feel another pinch as the crunch in the US will get worse. BOE trackers are always competitive as they track the rate that is used as a yard stick. However if he cannot afford for rates to go up then I would fix now and forget the beat the system stuff. I would rather kick myself for picking the wrong deal than getting repo'd!!

Also I think Brittania are a balance sheet lender, Nationwide are the biggest in the world I think! This means they will be far less affected by any credit crunch. Nationwides 5 year fix at 5.63% is very good.

Good luck what ever way he goes!

moneylover

I agree that 5.63% from Nationwide is good.
Would you expect that fixed rates won't go down much if any from this at any time in next two years? The thinking is that the tracker will drop at least half a percent by say Feb or so and hopefully fixed rates might also come down a bit. My son can risk a tracker as he is not at the top of what he could afford . But there is no point going with the flexibility of a tracker if the collective wisdom is that we wont see more than the most marginal of drops in fixed rates in the foreseeable future

Dan_Collins_2

Half a % by feb, first I heard that one! Which BDM fed you that?

moneylover

Oh, its late at night, sorry! I meant .25%!

sarkin

If your hedging on .25% drops It sounds like your son is maxed out. It is possible they could drop next year but over the next 5 who knows. Im not sure if 5 years is to long but that rate is good and you are protected if rates do start rising. As it says on the KFI could you afford your mortgage if rates go up 1%. If the answer is no then I would take the fixed rate. Hope this helps

rca779

Am I correct in thinking that the Nationwides 5 year fix at 5.63% is only available for new mortgages or at least a move of house. When I phoned Nationwide about a month ago I was told that this is not available for existing customers looking to remortgage?

Kind of goes against their TV adverts if true!

Dan_Collins_2

Its available to all but I think they drop the fee if your existing. You can look at existing online,.

moneylover

sarkin wrote: »

If your hedging on .25% drops It sounds like your son is maxed out. It is possible they could drop next year but over the next 5 who knows. Im not sure if 5 years is to long but that rate is good and you are protected if rates do start rising. As it says on the KFI could you afford your mortgage if rates go up 1%. If the answer is no then I would take the fixed rate. Hope this helps

No, my son won't be maxed out, he is lucky enough to be a young solicitor whose income will rise in line with his experience. He wants to go with a tracker (Nationwide you have limited tie in and Britannia none) in the hope that at some point he can jump to a 5 year fixed rate lower than on offer at present. With Britannia he would have a two year window of opportunity, with Nationwide its a lifetime product. So really what I am asking is - can we expect five year fixed rates to drop a little from their current best at some point and are they likely to remain a constant or even rise? Maybe it just isnt possible to have a reasoned view on this ? And should you give yourself a longer opportunity to jump ship from the tracker than just the two years Britannia offers?
I hope this makes sense.......

Dan_Collins_2

They may drop a little but nothing flash.