Fixed, tracker or discount

Gez_2

Hi all.

Our existing mortgage is up for renewal in a couple of months, and our lender (coop) has given us the options to move onto. There's a number of choices to consider.

I know a lot depends on personal situations, but what is the general feeling on market conditions at the moment? Which of the three options are generally considered the most sensible at this time?

Let's say we're looking at a two or three year deal, 90k, 21years remaining, repayment mortgage. Any advice appreciated!

Gez_2

I'd really appreciate your views on this - I'm really unsure of which way to go!

clelly

Hi,

I'm not an expert on this although look at the options banks are giving at the moment for 2,3,5yr fixed rate.The 5yr has the better deal,By the looks of it they are expecting the rates to come down in the forseeable future,
Tracker at the moment,maybe paying a bit more for a short time but could save you a good bit if the rates come down and a better fixed rate is promoted.

Jonbvn

As you say, it really depends on your personal circumstances. However, in order for you to decide, you should consider several issues, as follows:

1. Affordability: If you are struggling to meet your mtge payments every month, a rate increases could cause you serious problems - in this case fixed rate is probably best.

2. Flexibility: Do you want to make overpayments? If yes, a tracker is usually best.

3. Fees: You mtge is not particularly large. Therefore, if it is necessary to remortgage every few yrs the fees will be a significant proportion of your mtge. Therefore, maybe a longer term fix or a tracker would be best.

4. Rates: Most pundits expect rates to come down next year. After this who knows?

HTH.

sarkin

5 year fixed rates are looking good value for money at the momment, with arrangement fees of over a £1000 you could end up paying out a lot of money over the next 5 years on fees. However if rates come down then the tracker is the option. If you have long term plans to stay where you live I would take the five year fix sit back and forget about it.

Spudwud

Without looking at the exact options you have it's impossible to say really. I personally prefer good fixed rates, if you can comfortably afford the payment on a fixed rate then why not? Obviously though if the discounted rate is over a longer or equal period to the fixed rate and happens to be lower with the same revert rate (the rate when the deal comes to an end) then it makes sense to take that. Either way, fixed or discount, you will know what you're paying and not allow things outside of your control (a change in the BOE base rate) to effect your payment

RyanP_2

It does depend on your circumstances and your affordibility. Could you afford the mortgage payments if you were on a tracker and rates went up? by 0.25% - 0.5% if you can then a tracker may be the way to go. Feelings are that rates will go down but no one knows. Fixed rates are good if you want security of knowing what your payments are. Balance security of knowing your payments against how you would feel if rates went down and you were on a fixed rate.