Tracker mortgage.

tony3619

Hello. 

So I'm able to renew my fix the end of February (3 months early)

With fixed rates probably going to be around the 7-8 % mark by February it seems a tracker is the better option in the short term?  

Even if the base rate hits 5% and the tracker is 1.45% over base rate it's still lower? 

It only doesn't make sense if the prediction for the base rate was likely to go higher that  6% which is unlikely at this point? 

silvercar

The risk of tracker mortgages are that the base rate could change in the wrong direction, fixed rate give added security.

housebuyer143

tony3619 said:

Hello. 

So I'm able to renew my fix the end of February (3 months early)

With fixed rates probably going to be around the 7-8 % mark by February it seems a tracker is the better option in the short term?  

Even if the base rate hits 5% and the tracker is 1.45% over base rate it's still lower? 

It only doesn't make sense if the prediction for the base rate was likely to go higher that  6% which is unlikely at this point? 

It's unlikely fixed rates will top 7% as standard as most lenders have priced in the predicted base rate into the current rates and swaps are on their way down. 
A tracker is good providing you don't mind a risk your payments will increase if base should go to 6%. 

I chose to take that risk and we will see how it pays out. There are cheaper trackers than that around though so maybe worth changing lender for a better deal.

simon_or

tony3619 said:

Hello. 

So I'm able to renew my fix the end of February (3 months early)

With fixed rates probably going to be around the 7-8 % mark by February it seems a tracker is the better option in the short term?  

Even if the base rate hits 5% and the tracker is 1.45% over base rate it's still lower? 

It only doesn't make sense if the prediction for the base rate was likely to go higher that  6% which is unlikely at this point? 

Fixed Vs tracker - Can't say for sure what will work out better in the end as who knows which way interest rates (both fixed rates and the BOE rate) will go.

Personally, if the choice was between a 2yr tracker and 2yr fix, I don't see the point of the fix as it'll probably end up more expensive and you're still exposed to an unknown future rate at the end of two years.

Otoh, if you're thinking about a 2yr tracker Vs a 5yr fix, then there are good reasons to prefer one over the other.

If a tracker suits you, then I'd definitely also look at discount products from smaller building societies. Much lower rates than trackers and a good enough probability of them not passing on the BOE rate hikes.

tony3619

housebuyer143 said:

tony3619 said:

Hello. 

So I'm able to renew my fix the end of February (3 months early)

With fixed rates probably going to be around the 7-8 % mark by February it seems a tracker is the better option in the short term?  

Even if the base rate hits 5% and the tracker is 1.45% over base rate it's still lower? 

It only doesn't make sense if the prediction for the base rate was likely to go higher that  6% which is unlikely at this point? 

It's unlikely fixed rates will top 7% as standard as most lenders have priced in the predicted base rate into the current rates and swaps are on their way down. 
A tracker is good providing you don't mind a risk your payments will increase if base should go to 6%. 

I chose to take that risk and we will see how it pays out. There are cheaper trackers than that around though so maybe worth changing lender for a better deal.

Have lenders likely priced in the entire market prediction of 5.75% or only the November base rate increase? 

simon_or

In theory, the current fixed rates should largely be based on the current swap rates which should already have factored in future rate expectations (eg: BOE peak rate of less than 5% next year). So even if the bank rate went up as expected in future months, it should already largely already have been factored in to today's fixed rates.

In fact, going by this thread it looks like fixed rates are likely to go down a bit as the current rates were largely set during the panic after the last budget.

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

housebuyer143

tony3619 said:

housebuyer143 said:

tony3619 said:

Hello. 

So I'm able to renew my fix the end of February (3 months early)

With fixed rates probably going to be around the 7-8 % mark by February it seems a tracker is the better option in the short term?  

Even if the base rate hits 5% and the tracker is 1.45% over base rate it's still lower? 

It only doesn't make sense if the prediction for the base rate was likely to go higher that  6% which is unlikely at this point? 

It's unlikely fixed rates will top 7% as standard as most lenders have priced in the predicted base rate into the current rates and swaps are on their way down. 
A tracker is good providing you don't mind a risk your payments will increase if base should go to 6%. 

I chose to take that risk and we will see how it pays out. There are cheaper trackers than that around though so maybe worth changing lender for a better deal.

Have lenders likely priced in the entire market prediction of 5.75% or only the November base rate increase? 

Most have priced in the future predictions too, which is why many fixed rates are 3% over base rate which is unheard of.
Of course the government could do something nuts and that all change, but at the moment things seem to be on a downward trajectory