Why not a tracker mortgage?

houmie

My fixed mortgage of 1.44% ends in January 2023.

I'm currently with HSBC and an internal remortgaging seems to get me 3.39% - 2 Years fixed.  That's quite a hike. Then I was thinking why not picking a tracker from HSBC for 2.54% - 2 years term.

Could it get worse from here? The interest rate has to further go up by 1% to exceed the difference, otherwise a fixed rate would be a waste.

I know everyone prefers a fixed rate deal as it's a comfort to know it can't get worse.  But what if it gets better by next year? 

The webiste of Bank of England says:

Precisely where interest rates will go depends on what happens in the economy and what we think will happen to the rate of inflation over the next few years.

So we can’t say now exactly how high they will go. But they are not likely to reach the very high levels that some people experienced in the past.

What do you think?

london21

For certainty I prefer fixed.

In the short term the rates will increase.

Next increase is due on the 15/09 and 2 more after that.

Depends on your risk tolerance and circumstances.

tacpot12

I would not be surprised if rates increased to 5% over the next couple of year. When I had a mortgage, interest rates ranged between 7 and 15%. 

Fighter1986

There's also conjecture to be made surrounding the effect Liz Truss' energy deficit fund is going to have on inflation. That's bound to affect the BoE Base Rate too. 

Voyager2002

There can be no doubt that interest rates are rising globally, while Liz Truss's plans to cut taxes while massively increasing public spending mean that UK interest rates are likely to rise particularly steeply. If you get a tracker you will be exposed to this; if you take a fixed-rate product you will be paying something related to what experts expected interest rates to do at the time the product was introduced, plus their profit margin.

dunstonh

I'm currently with HSBC and an internal remortgaging seems to get me 3.39% - 2 Years fixed.  That's quite a hike. Then I was thinking why not picking a tracker from HSBC for 2.54% - 2 years term.

The long term average mortgage interest rate is closer to 7%.  So, moving to 3.39% from 1.44% is not quite a hike.

Could it get worse from here?

Yes.  It will do.    Markets are expecting the BoE to increase interest rates to 4%.  However, gilt movements in the last few weeks indicate that 5% is more likely.    Earlier in the year they expected 3%.      Historically, inflation has been controlled by interest rates going around 2% higher than the rate of inflation.   This time is a little different due to the cause but it is going to go up a fair bit more.

csgohan4

I was a 2 year tracker which finished this month, it was at a generous 1.08% plus BOE, I ended up on paying a higher interest rate than when I remortgaged @ 2.7%. I prefer certainty now and I fixed for 10 years when the deals were okish 6 months ago

If you want to go on a tracker, you are gambling big time and going to lose

laura_louise

If going to 3.39% feels like a hike, i'd stay well away from a tracker at the moment, you could easily exceed this just in the next 12 months. I just renewed my mortgage for 10 years and i've gone from 1.69% to 4.2% which has come as a shock but there's no way i'd put myself at the mercy of a 'low' rate tracker right now or anytime soon. 

fewcloudy

houmie said:

My fixed mortgage of 1.44% ends in January 2023.

I'm currently with HSBC and an internal remortgaging seems to get me 3.39% - 2 Years fixed.  That's quite a hike. Then I was thinking why not picking a tracker from HSBC for 2.54% - 2 years term.

Could it get worse from here? The interest rate has to further go up by 1% to exceed the difference, otherwise a fixed rate would be a waste.

I know everyone prefers a fixed rate deal as it's a comfort to know it can't get worse.  But what if it gets better by next year? 

The webiste of Bank of England says:

Precisely where interest rates will go depends on what happens in the economy and what we think will happen to the rate of inflation over the next few years.

So we can’t say now exactly how high they will go. But they are not likely to reach the very high levels that some people experienced in the past.

What do you think?

Hi houmie,

Many on here have been shouting that mortgage rates "can only go one way" since about 2008 (yes,15 years of it), therefore I predict you will not get many/any replies suggesting a tracker, as most seem rather risk averse. Perhaps it goes with the territory of being a 'moneysaving' site rather than moneygaining, worth remembering that before facing the demoralising sight of pages of timid "I'd fix right now for 10/20yrs if I could" type responses to your question.

Personally I'd wouldn't be fixing and taking that sort of hike. So many variables out there in the big bad world, and many of then could/will change quickly and, unexpectedly.

Energy crisis. War. Unexpected weather events. Post-pandemic recovery. All unexpected a few years ago, and are causing a rise in inflation. If not for them I do not think interest rates would have risen at all.  Some of these may be a non-issue in a few years hence. The 2 yr Energy Cap just announced could slow or halt interest rate rises, and that's just one thing. Russian oil turned back on and who knows what else to come?

Sometimes you just have to pull on your big boy pants, man up, and ride through the storm.  We are still sitting at what I consider to be historic low interest rates, and people are fixing for 10yrs at 4.2% I just find that staggering.

housebuyer143

houmie said:

My fixed mortgage of 1.44% ends in January 2023.

I'm currently with HSBC and an internal remortgaging seems to get me 3.39% - 2 Years fixed.  That's quite a hike. Then I was thinking why not picking a tracker from HSBC for 2.54% - 2 years term.

Could it get worse from here? The interest rate has to further go up by 1% to exceed the difference, otherwise a fixed rate would be a waste.

I know everyone prefers a fixed rate deal as it's a comfort to know it can't get worse.  But what if it gets better by next year? 

The webiste of Bank of England says:

Precisely where interest rates will go depends on what happens in the economy and what we think will happen to the rate of inflation over the next few years.

So we can’t say now exactly how high they will go. But they are not likely to reach the very high levels that some people experienced in the past.

What do you think?

I am in the exact same situation right now with my tracker 1.2% cheaper than the cheapest fixed. Will the base rate go up past 3% in the next 2 years, probably... Hard decision. They might also go down I suppose..

I am thinking 2yr fx offset as that will bring payments right down while I cover myself got short term rises.

jj_43

fixes are always more expensive and are priced to reflect current exceptions of interest rates.
i would go for tracker.