Tracker vs Fixed given recent BoE announcements

nnxen

Hi all,
Our mortgage deal comes to an end in a couple of months and I'm looking for our next deal. We're currently on 1.59% fixed. The fixed deal on offer at the moment is 3.54%, or a tracker at base rate + 1.39%.
Given that there are now predictions of a recession but also that the base rate may rise, I'm torn over what to do.
I assume a tracker might be a better bet if a recession does hit, but if interest rates continue to rise, fixed might be a better bet? (as the base rate only needs to get to 2.15% until the fixed works out better). 

RelievedSheff

I would personally go for the fixed rate given what the BOE have said today.

They have made it clear that their intention is to rein in inflation and get it back down to 2%. That mean interest rates are only heading one way for the foreseeable future.

ACG

Its quite interesting this as I had a meeting with a lender last month. 
They are bringing out silly low variable rates. The reason being is that building societies (not banks) have to do 40% of their lending on fixed rates and 40% on variable rates. 

Not many people want variable rates at the moment. So they are bringing out variable rates linked to THEIR base rate (not the bank of england base rate). The reason for this is because they do not need to put rates up as much as the bank of england is, so actually in time it might look even better. 

I would still do a fixed rate personally, but I can see variable rates looking more attractive over the next 6 months. 

london21

Personally will go for a 5 years fixed.

Variabe, so much uncertainty and rates keep increassing. 

simon_or

nnxen said:

Hi all,
Our mortgage deal comes to an end in a couple of months and I'm looking for our next deal. We're currently on 1.59% fixed. The fixed deal on offer at the moment is 3.54%, or a tracker at base rate + 1.39%.
Given that there are now predictions of a recession but also that the base rate may rise, I'm torn over what to do.
I assume a tracker might be a better bet if a recession does hit, but if interest rates continue to rise, fixed might be a better bet? (as the base rate only needs to get to 2.15% until the fixed works out better). 

I suppose it depends on one's priorities and attitude to risk. My personal and financial circumstances prioritise flexibility so I never fix for more than 2 year's.

For me, in the current environment, I don't see the point of fixing for 2 years so it's discount or tracker rates over fixed rates. I recently remortgaged and moved to the +0.75% Barclays erc-free tracker as we'll be moving next year.

nnxen

Thank you for the replies. For what it's worth, I was leaning towards a 2 year fixed anyway, particularly to ease the stress of watching the interest rates!

simon_or said:
 I recently remortgaged and moved to the +0.75% Barclays erc-free tracker as we'll be moving next year.

That's something we're having to consider too. We're also planning to move at some point in the next year, but it's a portable product without fees so I think we should be OK on the fixed. I'm tempted to up the term to 30 years during renewal as we're likely to go for a 30 year mortgage for the remainder when we move so it would be good to keep them in sync and flatten out the repayments. We have a 10% overpayment allowance, so we still have that flexibility to bring the term back down. Also means we can focus our overpayments on the more expensive product.

IAMIAM

It depends on your finances. I am self sufficient to some extent and want to move and the flexibility to do that, so will probably apply for a tracker when I can in 6 months. 

If you have a 4 bed semi/detached with 3 kids and a large mortgage and job insecurity or sole income household etc. Your priorities are different. 

simon_or

nnxen said:

Thank you for the replies. For what it's worth, I was leaning towards a 2 year fixed anyway, particularly to ease the stress of watching the interest rates!

simon_or said:
 I recently remortgaged and moved to the +0.75% Barclays erc-free tracker as we'll be moving next year.

That's something we're having to consider too. We're also planning to move at some point in the next year, but it's a portable product without fees so I think we should be OK on the fixed. I'm tempted to up the term to 30 years during renewal as we're likely to go for a 30 year mortgage for the remainder when we move so it would be good to keep them in sync and flatten out the repayments. We have a 10% overpayment allowance, so we still have that flexibility to bring the term back down. Also means we can focus our overpayments on the more expensive product.

Unfortunately I can't rely on porting as we need will need to go to our upper limit on borrowing so definitely need access to the whole market when we move.

Sistergold

I never fix come rain come sunshine! I like to track at whatever above the bank of England rate. In general trackers seem to bring out cheaper products and I have paid less over time BUT ofcause it does go up and down and that’s what I prefer. This approach is not for everyone as some people want payments to stay the same. I think life is full of risks and so don’t prefer to take that chance.