Why not a tracker mortgage?

saucer

We're less than 4 years from being able to pay our offseet off in full, but in the meantime are on a tracker at .49 above base rate.  I have had the agreement in principle for a fix that will probably be 3.8%.  While we await the next stage in the process with FD, I am wondering whether we'd be better sticking with what we've got

housebuyer143

saucer said:

We're less than 4 years from being able to pay our offseet off in full, but in the meantime are on a tracker at .49 above base rate.  I have had the agreement in principle for a fix that will probably be 3.8%.  While we await the next stage in the process with FD, I am wondering whether we'd be better sticking with what we've got

Tricky isn't it... It's like the base rate would have to be 3.2% plus to see any benefit and then more to cover the increase you pay while it isn't. Such a hard decision and one that's stumping me while I have my 0.69% above base tracker also. Then if you don't fix and the base rate goes up, you can be certain that fix rates will be higher again.

laura_louise

fewcloudy said:

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.

I believe you're referring to me there. I am fixing because of my personal circumstances, and the rate i'm fixing at is because I cannot switch mortgage provider right now. The difference between a 5 and 10 year fix was a very small amount (less than £10 a month) so I just took the 10 year option which also has no ERC so is completely flexible. Perhaps later i will reassess and exit my fix, but for me i've definitely done the right thing for the short term and can easily exit the fix anytime. I am of the view that medium-long term, rates are not going to come down again, but who knows.. but either way I feel i'm covered. The knowledge that my payments won't increase if rates go way higher is really important for me even if i am paying an extra £10 a month - a price worth paying for me to be able to sleep at night. Cutting my bills where i can but balancing with the need to live a life as free from anxiety as much as possible. 

Different circumstances and all. Just my viewpoint. 

saucer

housebuyer143 said:

saucer said:

We're less than 4 years from being able to pay our offseet off in full, but in the meantime are on a tracker at .49 above base rate.  I have had the agreement in principle for a fix that will probably be 3.8%.  While we await the next stage in the process with FD, I am wondering whether we'd be better sticking with what we've got

Tricky isn't it... It's like the base rate would have to be 3.2% plus to see any benefit and then more to cover the increase you pay while it isn't. Such a hard decision and one that's stumping me while I have my 0.69% above base tracker also. Then if you don't fix and the base rate goes up, you can be certain that fix rates will be higher again.

I have been putting it all through the spreadsheet. I suppose the bottom line is that either way we are losing less than cash is being eroded by inflation.  I think i could see us losing out with fixing, but it avoids the worry that rates do go higher. We’ve had a good run with the tracker and pension savings, time to fix and avoid risking losses I think. 

SouthLondonUser

OP, the real question is: what are your personal circumstances and what is the maximum rate you could live with?

There can certainly be many scenarios where a tracker proves cheaper than fixing, even if rates go up (but not immediately).
But there are also other scenarios where the opposite applies.

If you can withstand significant rates increases, then, by all means, consider a tracker. Otherwise no.