Is my tracker mortgage that good?

Andrew1981

I've had my tracker mortgage for about 15 years, it's an old alliance and Leicester one that's now santander. 

It's 0.9 above BOE base rate for life (25yrs left on mortgage of 350k). Fully offset (can be handy), no ERC, no other charges at all.

I've enjoyed the good times with this mortgage... And bracing for bad times now. With markets pricing in BOE base reaching 5.5% our monthly payment will be doable.... But much more could get very painful.

I love my mortgage and am fearful that I'd be ditching this to save maybe £10k whilst the rates peak, but will lose out on 22 years of a good mortgage after if rates drop again.

Grateful for thoughts 👍

CSL0183

Got to take the rough with the smooth. I would agree with your assessment. Ride out this storm and it should be beneficial in the long run when they drop again. 

jj_43

I would agree. Rates don’t peak for long, they just need to do the required damage to get inflation under control.

fewcloudy

Andrew1981 said:

I've had my tracker mortgage for about 15 years, it's an old alliance and Leicester one that's now santander. 

It's 0.9 above BOE base rate for life (25yrs left on mortgage of 350k). Fully offset (can be handy), no ERC, no other charges at all.

I've enjoyed the good times with this mortgage... And bracing for bad times now. With markets pricing in BOE base reaching 5.5% our monthly payment will be doable.... But much more could get very painful.

I love my mortgage and am fearful that I'd be ditching this to save maybe £10k whilst the rates peak, but will lose out on 22 years of a good mortgage after if rates drop again.

Grateful for thoughts 👍

@Andrew1981

When you started your mortgage 15 years ago (2007?) I am assuming the interest rates were around the 5% mark? Plus your 0.9% so maybe nearer 6% for you?

But since then you had about a decade with a mortgage of 0.9% above BOE base rate, which was near zero?

If so, I had something similar also from Alliance and Leicester. First years monthly payments were around £1100 but once the interest rate dropped through the floor, monthly payment dropped to around £500.  By continuing to pay the £1100 agreed in the beginning, the mortgage finished over 10 years ahead of time. For me, that was 'enjoying the good times' and there is no mortgage to brace for bad times.

It's not clear to me, but if you still have 350k to pay after 15 years then your loan must've been ginormous compared to mine, but nevertheless if I were you I would keep your tracker, as I would expect you to have more good times ahead over the next 25 (22?) years you have left.

Andrew1981

Thanks for your replies.

@fewcloudy, you're right in your mortgage assumption... But also in that time I've moved house twice (most recently 4 months ago... 350k mortgage ) and the mortgage allowed me increase the value and term with no change in rates or charges.

I didn't make overpayment when the rate was low as that money was better off invested elsewhere

As others have suggested I'm veering towards holding on tight and not buying a 5yr fix or something at the moment  

Sparky79

I am in a similar position. Lifetime tracker with 15yrs to run @ base +0.79. Overpaid and invested elsewhere in the good times so currently looking to pay off in 6-8 yrs. I am prepared to ride out the bad times but as a hedge I have agreed in principle to a 5yr fixed with current provider @ 3.80%. I have 6mths to return paperwork so intend to see how the land lies early next year and make the decision to stay or switch the.

saucer

Andrew1981 said:

Thanks for your replies.

@fewcloudy, you're right in your mortgage assumption... But also in that time I've moved house twice (most recently 4 months ago... 350k mortgage ) and the mortgage allowed me increase the value and term with no change in rates or charges.

I didn't make overpayment when the rate was low as that money was better off invested elsewhere

As others have suggested I'm veering towards holding on tight and not buying a 5yr fix or something at the moment  

I have had an offset tracker at BoE +.49% for 20 years and extended it another 10 or so last year.  I have been focussed on the pensions and I don't have anything in the offset accounts.  My circumstances are different because the amount owed is a lot less, below 150k, and I am planning on retiring in next 5 years and will have funds to pay it off comfortably at that point.  On that basis i have booked a 5 year fix agreed at 3.6% and paid the fee for this. It is possible that I won't sign the agreement to move over to it, and we have 6 months to decide, but I am thinking that it is very likely I will.  As I said, different circumstances but a fix is better for me.  For you, its about whether you can afford it interest rates went up to 7 or 8%, not likely but who knows. 

fewcloudy

Sparky79 said:

I am in a similar position. Lifetime tracker with 15yrs to run @ base +0.79. Overpaid and invested elsewhere in the good times so currently looking to pay off in 6-8 yrs. I am prepared to ride out the bad times but as a hedge I have agreed in principle to a 5yr fixed with current provider @ 3.80%. I have 6mths to return paperwork so intend to see how the land lies early next year and make the decision to stay or switch the.

I remember years ago having a debate with my broker on whether to overpay vs invest/save elsewhere (though it sounds like you did both).  I chose to overpay the mortgage, because once the money came off the mortgage it was gone, and I had a fear that having that same money saved (but available to spend) might mean I used it for something else because I could.  Probably says more about my own self-control than anything else, but maybe it's about what works for you sometimes rather than the absolute best money-saving option.

My advisor used to say they were both good options, as both would result in being mortgage free earlier than I otherwise would be.

I guess I'm therefore a bit confused as to why you guys that chose to save rather than overpay find yourself facing potential bad times as rates rise?  Don't you just now take the investment and use it to get rid of the remaining mortgage, esp now that monthly repayments may rise considerably?  And even if you have moved house a few times, you could still use the investment to at least pay off a good chunk, no?

But from what I'm reading on here re. low rate trackers the advice seems to be ride it out, and have the agreement in principle like you have, just in case.

Sparky79

I guess it is always human nature to see the grass is greener elsewhere. Yes I have paid a decent chunk down but ultimately as it stands I may be paying 6+% for a short while instead of ~3.75% if I fix.
Now the question is how long will rates remain elevated and even if they do come back down will they fall far enough to make the tracker viable again. I'm leaning to the opinion that the time of ultra low rates is behind us and we will see an average of base rates ~3-4% for the foreseeable future (and probably therefore the remainder of my 'mortgaged life').
Hence I have hedged my bets with the fixed rate and assuming nothing major changes in the next 6 months will revert to that for peace of mind.

I can imagine this decision is being considered in households up and the down country for the time being!

Mish_Mash

Andrew1981 said:

I've had my tracker mortgage for about 15 years, it's an old alliance and Leicester one that's now santander. 

It's 0.9 above BOE base rate for life (25yrs left on mortgage of 350k). Fully offset (can be handy), no ERC, no other charges at all.

I've enjoyed the good times with this mortgage... And bracing for bad times now. With markets pricing in BOE base reaching 5.5% our monthly payment will be doable.... But much more could get very painful.

I love my mortgage and am fearful that I'd be ditching this to save maybe £10k whilst the rates peak, but will lose out on 22 years of a good mortgage after if rates drop again.

Grateful for thoughts 👍

I have the same mortgage and the same dilemma.I love having the ability to overpay and to be able to withdraw the money again. But I am worried about the financial climate. 

I have saved the money to repay the mortgage into share isas but dont want to take the money out at this point as my shares have fallen in value.

I have also had an Agreement in Principle for an interest only 10 year Halifax mortgage at 3.49 which I can move onto in Dec. This is the safe option for me and will cover me till retirement so hopefully I won’t have to remortgage again.

Still not sure what to opt for.I am leaning towards the Halifax remortgage. 

misterbarlow

Similar situation to OP, we bought in 2006 on 2yr fixed which then went onto a +1% lifetime tracker, our mortgage nearly halved for last 10-12yrs or so, its now gone up around £100 already this year..

We don't know whether to ride it out for a few years, or switch and fix at higher rate now as decent fixed deals are rapidly disappearing this week..??