Thinking of moving in next 2 years - Re-mortgage now to tracker or fixed? Help.

Cheeky73

Hi, my very low interest rate is coming to an end beginning of Aug (1.33%  sob!).  My options are stay with my current bank and take a tracker or fixed or move to another bank.

The thing is I really want to move within the next couple of years, but right now I need to save a bit more money, to be able to afford what I want - e.g.  my current property is worth £300K and my wish is to buy a property of approx £400K.  I would rather save as much cash as possible to avoid borrowing more at today's interest rates but as I need to re-mortgage in the next 3 months I need to make the best short term decision whilst thinking about my long term goals.

At my current years of 19.7, my mortgage payments go up by £300 a month - eek, but I plan to extend my mortgage term to 25 years to get these monthly payments down.

My options are:

1) Stay with current bank at a rate of 4.49% fixed.  So I am fixed at this rate for 2 years and penalties if I leave early, but I can port this if I move.
2) Stat with current bank at a tracker rate of 4.59%.  This is paying a bit more than the fixed, but the benefit is, I can leave without any penalties - i.e. if the interest rate comes down or better rates at another bank.  However I risk the base rate going up and therefore my monthly payments going up.
3) Move to another bank at a fixed or tracker - slightly better rates than the rates above, but I have the hassle of a new mortgage application, solicitor fees etc.

My thoughts are to stay with my current bank - to avoid a whole new brand new mortgage application and solicitors fees etc and to go with option 2 - tracker rate.  .  This is because it gives me flexibility to move providers if the interest rate comes down and also if my situation changes - i.e. I move house.

I just want to get opinions to ensure I am making the best decision.  Is there a better option for my situation?  Do we think interest rates are going to come down within the next 2 years?

Thanks so much

Wongus

I am in a similar position, fixed rate coming to an end in Sept and also looking to move after the next year or 2. Based on the rates quoted above it sounds like you are with Santander. The 4.49% 2 year fixed has no product fees, which cannot be ignored. 

As I almost 100% won't be moving over the next year, I don't need the full flexibility of a tracker, so would prefer to be fixed to keep my costs lower and stable. I did look at other 2 year fixed rate products with other lenders, but even at a rate of 4.03% (Barclays) it's not really worth moving after considering the product fees with Barclays and the exit fees with Santander. I also considered a tracker, however since I probably won't be moving over the next year, there's no point paying a higher rate in the first year on the tracker, and I doubt I'd be saving much in the 2nd year anyway. 

Cheeky73

Thanks for your reply.  yes it is with Santander.

I agree with you on it doesn't make sense to move providers for not much difference in rates.

I guess I need do need to work out if I will definitely move within 2 years, otherwise I am paying more for flexibility for nothing.
However at the same time, interest rates could come down in the next year to year and a half??

Decisions!!

Wongus

I'm working on the assumption that we will see at least 2 more rate rises, possibly 3 with a terminal rate at 5% before they start coming down. 

So if you opt for the tracker, then budget for 4.50% + 0.34%, 4.75% + 0.34% and 5% + 0.34%, in case rates move against your hypothesis of coming down. 

coypondboy

why on earth did you not fix for 5 yrs I had the choice of 1.05% with no product fee 2.5 yrs ago or a 5 yr fixed for 1.28% with no product fee, it was a no brainer you might want to complain to your mortgage broker why he didn't recommend 5 yrs or the bank/b/s as mortgages regulated and the ambulance chasers are smelling another miss-seeling scandal

Cheeky73

@Wongus - I'm working on the theory that there won't be any further increases?  But who knows???

@coypondboy - well I did fix my other property for 5 years at a similar rate (this is rented), so I can't really remember why I didn't fix for 5 years on my own (live in) property.  Probably because I don't like committing when I don't know where I will be in 2 years.  There was also a possibility then that I was going to move even back then, but now it is a bit more certain.  So yes I regret not fixing then for 5 years!  But at the same time, neither my broker or myself had a crystal ball on what was going to happen 2 years later!!  Not sure I have grounds to complain!

Lucky you for being able to see the future!!

Londoncheesecake

We went for a tracker with Santander, same rates similar scenario and have increased our term to reduce monthly payments for now.
We wanted flexibility, but it was a close call choosing between that and the 2 year fixed. 

flipper_72

Check whether the fixed rate is portable. We moved 18 months into a 5 year 1.39% fix and took the rate with us.

FashionHeart

https://forums.moneysavingexpert.com/discussion/6442791/thinking-of-moving-in-next-2-years-re-mortgage-now-to-tracker-or-fixed-help

I would fix the mortgage for the 2 years as you don't know how much extra you will be paying at these uncertain times with interest rates increasing.

I'm in the same situation as I am also thinking of moving within the next 2-5 years (my current mortgage also ends in August 2023).

Also to ensure I know what I'm paying each month, I've opted to fix my current mortgage.