Variable or fixed as first time buyer? 8 November 2022 at 7:49PM in Mortgages & endowments 22 replies 882 views

Bookowl

I’m a first time buyer and am wanting to get advice on what others have done as a first time buyer.
The rates I’m getting are:
fixed 5 year 5.39% £454
variable 2 year 3.15% £348

I’d like the idea of the same monthly repayments, however, I wouldn’t want to be paying a high interest rate if the interest rates drop. On the other hand I don’t know how high the interest rates will go.

Any advice
Thanks 

K_S

@bookowl I don't have an opinion on what you should do as that largely depends on your personal financial circumstances and attitude. What will work out better financially in hindsight is anyone's guess.

Going by my recent FTB clients, after weighing pros and cons, most of them opted for fixes (trending towards 5 years over shorter fixes in recent months) while a couple (borrowing well within affordability and high income) leaned towards variable products (discounts). 

I had one FTB client who started the process set on a tracker but moved to a 5yr fix in the end as they found it too stressful to be keeping an eye on ever increasing BOE rates.

Do note that I'm an independent small firm so the above observations are based on a pretty small sample size

Bookowl said:

I’m a first time buyer and am wanting to get advice on what others have done as a first time buyer.
The rates I’m getting are:
fixed 5 year 5.39% £454
variable 2 year 3.15% £348

I’d like the idea of the same monthly repayments, however, I wouldn’t want to be paying a high interest rate if the interest rates drop. On the other hand I don’t know how high the interest rates will go.

Any advice
Thanks 

Bookowl

Thanks K_S for your input.
My salary is low but I’ve a high deposit.
The rates for a 5 year fixed is £454 5.39% and a 2 year variable is 3.15% £348.

I like the idea of knowing my monthly repayments, however, if interest rates drop I’m stuck on a 5 year fixed and can’t move. With the variable I don’t (no one does!) or how high interest rates go. 

My mortgage advisor has suggested a variable as he doesn’t think interest rates will rise much higher- but who knows.

Any input most welcome 

housebuyer143

Bookowl said:

Thanks K_S for your input.
My salary is low but I’ve a high deposit.
The rates for a 5 year fixed is £454 5.39% and a 2 year variable is 3.15% £348.

I like the idea of knowing my monthly repayments, however, if interest rates drop I’m stuck on a 5 year fixed and can’t move. With the variable I don’t (no one does!) or how high interest rates go. 

My mortgage advisor has suggested a variable as he doesn’t think interest rates will rise much higher- but who knows.

Any input most welcome 

It's the risk you take. You cant hedge your bets with rates going down on a fixed (and I have been stung by this everytime I have fixed in the past/, but you are paying to be protected from the rises. 
If you can or don't want to pay a tracker if base rate gets to 6% then go for a fix just in case.

Too add, if it's discounted it doesn't go up and down with the base rate at all but instead at the lenders whim. They tend to go up slower but maybe don't come down as fast as if you were on a tracker.

simon_or

Is it a discounted variable or a tracker variable? If it's 3.15% I think it's a discounted.

I would go for the 3.15% discounted.

snowqueen555

I am going for the 5 year deal. I'm going for 5.39% (30yrs).

The amount of the principle being paid off is so small in the first 5 years, it is a bit worrying. After a year I will be overpaying for 4 years before remortgaging.

Choirgrl

I’m a FTB and am fixing for five years (also at 5.39%). For me, the certainty that my payments won’t go higher during the fix outweighs the possibility that I might end up paying a bit more than I would have on a variable or tracker rate. Also, I don’t expect rates to drop in at least the next two years. 

JohnFTB

Bookowl said:

The rates I’m getting are:
fixed 5 year 5.39% £454
variable 2 year 3.15% £348

i'm usally a fixer but I'd be going for the variable here, I can't see that rate going higher than the fix in 2 years.

You could take the variable rate but pay the difference between variable and fix into a savings account to build up a bit of a buffer in rises do really rise? 

Bookowl

simon_or said:

Is it a discounted variable or a tracker variable? If it's 3.15% I think it's a discounted.

I would go for the 3.15% discounted.

It’s on a tracker variable if that makes a difference?

Bookowl

JohnFTB said:

Bookowl said:

The rates I’m getting are:
fixed 5 year 5.39% £454
variable 2 year 3.15% £348

i'm usally a fixer but I'd be going for the variable here, I can't see that rate going higher than the fix in 2 years.

You could take the variable rate but pay the difference between variable and fix into a savings account to build up a bit of a buffer in rises do really rise? 

That might be a good idea thanks 

K_S

Bookowl said:

simon_or said:

Is it a discounted variable or a tracker variable? If it's 3.15% I think it's a discounted.

I would go for the 3.15% discounted.

It’s on a tracker variable if that makes a difference?

@bookowl If it's a NatWest 75% LTV tracker quoted at 3.15%, that's probably a sourcing error which is still using the old BOE rate of 2.25% instead of 3%. If it's that product (NatWest BOE+0.90% tracker), it *should* be 3.90% (or 3.89% from tomorrow as they're dropping slightly).

You should ask your broker to source again tomorrow as some other mainstream lender tracker rates are falling further so worth a review.