Advice please on Tracker vs Fixed

harrness

Hi

Folks, I am new to the forum and could really do with some help.

My daughter has reached the end of a 2 year fixed mortgage and is looking at a remortgage.

She lives in Belfast and is currently with HSBC, she needs to stay with HSBC as they are the only provider that will give her the required amount, based on her wage.

She needs £101000 over 35 years, against a property valued at £141000.

HSBC have offered a number of options but the best for monthly payments are :-

Option 1. Two year Tracker starting at 4.49% = £477
Option 2. Five year fixed at 4.49% = £4

We realise there downfalls with either option.

We are both unsure which to go with, any advice would be greatly appreciated.

Kind regards
Harry

harrness

Sorry, fingers going faster than brain.

Option 2 is £477 per month

jonnypb

If the £477 a month is affordable then you have the certainty of that for 5 years if you fix.  A tracker can go up or down, the tracker is likely to rise over the next few months, but then who knows what will happen with the interest rates.  It looks like the rates won't be going as high as they previously thought, so hopefully they should settle down in the next 12 months.

Also have to consider if there's any plans to move in the next 5 years, a 5 year fix will probably have quite high ERC in the first few years of the mortgage, so probably not great if a move is planned in the next few years.

Nailer99

That tracker is likely to rise at least half a percent and probably more like (at least) a whole percent over the next 6 months. It is then likely to decline.

They will probably balance out similar in the end. If you value stability I’d go with the fixed rate. 

harrness

jonnypb said:

If the £477 a month is affordable then you have the certainty of that for 5 years if you fix.  A tracker can go up or down, the tracker is likely to rise over the next few months, but then who knows what will happen with the interest rates.  It looks like the rates won't be going as high as they previously thought, so hopefully they should settle down in the next 12 months.

Also have to consider if there's any plans to move in the next 5 years, a 5 year fix will probably have quite high ERC in the first few years of the mortgage, so probably not great if a move is planned in the next few years.

thanks Jonnypb

she wont be moving in the next 5 years.
the tracker has no ERC
the fixed could be 5% = £5000.

she is looking to me for advice but I really cant make a call for which is better.

amateur_house

It may be possible to port the mortgage even if she did move - my HSBC fixed rate mortgage is portable - but it was taken out 5 years ago, so things may have changed since then. 

Apart from ERC another disadvantage of fixed rates is the maximum overpayment allowance of 10% per year, some HSBC trackers allow unlimited overpayments.

jonnypb

harrness said:

jonnypb said:

If the £477 a month is affordable then you have the certainty of that for 5 years if you fix.  A tracker can go up or down, the tracker is likely to rise over the next few months, but then who knows what will happen with the interest rates.  It looks like the rates won't be going as high as they previously thought, so hopefully they should settle down in the next 12 months.

Also have to consider if there's any plans to move in the next 5 years, a 5 year fix will probably have quite high ERC in the first few years of the mortgage, so probably not great if a move is planned in the next few years.

thanks Jonnypb

she wont be moving in the next 5 years.
the tracker has no ERC
the fixed could be 5% = £5000.

she is looking to me for advice but I really cant make a call for which is better.

No one can really say if fixed or tracker is better.  I'm coming out of a 5 year 2% fix and am going to go on a tracker for 2 years purely because people aren't expecting the interest rate to go as high as initially thought and I'm hoping that fix rate mortgages might be around 3.5% in a couple of years.  Doesn't help you if you have to stick with HSBC, but you can currently get a 2 year tracker with no fees for BoE base rate + 0.39%

FashionHeart

harrness said:

Hi

Folks, I am new to the forum and could really do with some help.

My daughter has reached the end of a 2 year fixed mortgage and is looking at a remortgage.

She lives in Belfast and is currently with HSBC, she needs to stay with HSBC as they are the only provider that will give her the required amount, based on her wage.

She needs £101000 over 35 years, against a property valued at £141000.

HSBC have offered a number of options but the best for monthly payments are :-

Option 1. Two year Tracker starting at 4.49% = £477
Option 2. Five year fixed at 4.49% = £4

We realise there downfalls with either option.

We are both unsure which to go with, any advice would be greatly appreciated.

Kind regards
Harry

Hi, I'm in the same situation as your daughter.
I'm also with HSBC and my 2-year FR ends soon (July 2023).
Either way, remortgaging will be expensive now due to the current climate (in terms of interest rates anyway) - does your daughter have Mortgage Broker?
This is what I suggest you do as they have access to a whole range of deals that we customers can't and the option I'm only taking at the moment.
Looking at your information, I think a 5-year FR would be better as anything can happen with interest rates at the moment.