New fixed rate or variable? 31 October 2022 at 11:43AM in Mortgages & endowments 24 replies 2.4K views

greyjoy70

My 2 year fixed rate of an amazing 1.34% with TSB is coming to an end in 30 days. It's a sub account of a three part mortgage with TSB with the other two parts being on very good fixed rates so doesn't make any sense to move entire mortgage to another provider. 13 yrs left on the mortgage.

Latest deals with TSB are:

Fixed with 0 fee:
6.49% 2 yrs
6.19% 5 yrs
5.79% 10 yrs

Tracker with £995 fee
3.79% 2 yrs

Their variable rate is 5.74 so with the upcoming rate review on 3rd Nov I'm keen to make a decision today to lock in a deal but can't decide. Is going onto variable a big risk or just lock in for 2 years hoping the situation has improved by then?

Big_Rock

Tracker with £995 fee
3.79% 2 yrs

IMHO

Troy_af

Big_Rock said:

Tracker with £995 fee
3.79% 2 yrs

IMHO

I thought about taking a tracker myself. However, correct me if I'm wrong, but isn't a tracker something like 1% above the base rate? With the base rate expecting to be 6%, possibly 7% throught next year?

This is what put me off.

greyjoy70

Troy_af said:

Big_Rock said:

Tracker with £995 fee
3.79% 2 yrs

IMHO

I thought about taking a tracker myself. However, correct me if I'm wrong, but isn't a tracker something like 1% above the base rate? With the base rate expecting to be 6%, possibly 7% throught next year?

This is what put me off.

it's 3.79% (variable) tracks at 1.54% above the base rate so yes it will no doubt go up. 

greyjoy70

Big_Rock said:

Tracker with £995 fee
3.79% 2 yrs

IMHO

But doesn't the £995 fee negate any savings made by the lower rate compared to the zero fee fixed deals?

K_S

greyjoy70 said:

My 2 year fixed rate of an amazing 1.34% with TSB is coming to an end in 30 days. It's a sub account of a three part mortgage with TSB with the other two parts being on very good fixed rates so doesn't make any sense to move entire mortgage to another provider. 13 yrs left on the mortgage.

Latest deals with TSB are:

Fixed with 0 fee:
6.49% 2 yrs
6.19% 5 yrs
5.79% 10 yrs

Tracker with £995 fee
3.79% 2 yrs

Their variable rate is 5.74 so with the upcoming rate review on 3rd Nov I'm keen to make a decision today to lock in a deal but can't decide. Is going onto variable a big risk or just lock in for 2 years hoping the situation has improved by then?

@greyjoy70 Is the loan size large enough to negate the impact of the 1k fee? Is the reason for a tracker over fixed that you want to be able to align the product end date without an ERC or is it purely to do with a lower rate.

Plus, with the tracker kicking in in 30 days, you're looking at 2 upcoming BOE rate rises, one this week and one in early Dec. So the rate could easily be 4.79% (even assuming a lower than expected rise of 0.5% on Thursday) a week into your new rate so do keep that in mind when comparing rates.

greyjoy70

K_S said:

@greyjoy70 Is the loan size large enough to negate the impact of the 1k fee? Is the reason for a tracker over fixed that you want to be able to align the product end date without an ERC or is it purely to do with a lower rate.

Plus, with the tracker kicking in in 30 days, you're looking at 2 upcoming BOE rate rises, one this week and one in early Dec. So the rate could easily be 4.79% (even assuming a lower than expected rise of 0.5% on Thursday) a week into your new rate so do keep that in mind when comparing rates.

I just want to get the lowest rate I can for a few years.

This sub account is only 25% of the entire mortgage (approx 20k)

This is how my deal is broken down:

01 - 1.34% expires Nov 30 2022
02 - 2.42% for life of mortgage 
03 - 2.74% fixed until 2027

K_S

greyjoy70 said:

K_S said:

@greyjoy70 Is the loan size large enough to negate the impact of the 1k fee? Is the reason for a tracker over fixed that you want to be able to align the product end date without an ERC or is it purely to do with a lower rate.

Plus, with the tracker kicking in in 30 days, you're looking at 2 upcoming BOE rate rises, one this week and one in early Dec. So the rate could easily be 4.79% (even assuming a lower than expected rise of 0.5% on Thursday) a week into your new rate so do keep that in mind when comparing rates.

I just want to get the lowest rate I can for a few years.

This sub account is only 25% of the entire mortgage (approx 20k)

This is how my deal is broken down:

01 - 1.34% expires Nov 30 2022
02 - 2.42% for life of mortgage 
03 - 2.74% fixed until 2027

@greyjoy70 With that loan size, if the only reason for a tracker is a lower rate, then you need to be looking at the total-cost (interest plus fees) rather than just the rate.

You'd have to do the numbers to be sure but if you're comparing a no-fee 6.5% 2yr fix with a £1k fee tracker that is likely to start at 4.8% (after the Nov and Dec rate hikes), with a 20k loan size I doubt the tracker is going to save you much money (if any) over a 2 year period even if the rate goes no higher than 4.8%.

greyjoy70

K_S said:

@greyjoy70 With that loan size, if the only reason for a tracker is a lower rate, then you need to be looking at the total-cost (interest plus fees) rather than just the rate.

You'd have to do the numbers to be sure but if you're comparing a no-fee 6.5% 2yr fix with a £1k fee tracker that is likely to start at 4.8% (after the Nov and Dec rate hikes), with a 20k loan size I doubt the tracker is going to save you much money (if any) over a 2 year period even if the rate goes no higher than 4.8%.

thanks for your advice, after doing the sums I agree, the tracker seems pointless.  My next dilemma is whether to fix for a longer period than 2 years. I guess nobody knows how it's going to pan out over the next 2 years but I doubt we will see super low rates for a long time, if ever again. 

Is there a point when mortgage providers will stop applying every BOE rise otherwise we could see rates as high as 8-9% Surely they must plateau  at some point?

greyjoy70

so this morning TBS variable has gone up to 6.49%. Their current fixed rates are 6.49% 2 yr and 6.19 5 yrs. 

I have to stay with TSB so the dilemma is to fix for 2 or 5 yrs?

simon_or

TSB are really milking it aren't they. In your place I would take a fix length that lets me align the different mortgage parts in the future so that I'm not always tied to one bank.

Rates are actually going down slightly in the wider market inspite of the latest bank of england rate rise.

https://forums.moneysavingexpert.com/discussion/6400283/post-boe-november-rate-rise-movement-in-mainstream-mortgage-fixed-rates