Tracker or Fix?

Cornonthecob

I'm hoping to get some opinions/advice on my current situation.

My fixed deal ends at the end of August, so I need to move onto a new deal. I'm unsure whether we'd be better off with a tracker and fixed deal.

We're hoping to move to a bigger house within the next year, therefore my instinct is to go with a tracker so that we can get out of the deal without any early repayment charge. If we were to go with a fixed deal, we'd have to port it when we moved and then get a further deal for the remaining amount we'd need to borrow. I'm not keen on doing that, as then we have to stick with the same lender and I'm concerned it will end up being more expensive and messy.

A 2 year tracker is currently cheaper than a 2 year fix, but I know that there's a good chance interest rates will continue to rise and a tracker may end up being higher than the fix we're being offered. 

Can anyone give me an opinion about what might be best for us to do? 

MFWannabe

What’s the costs / interest rates for both? 

Cornonthecob

2 year fix - 5.59% - £1,140 a month 
2 year tracker - 5.14% (base rate + 0.14) - £1,090 a month 

MFWannabe

What about longer than 2 year? Do you have 3 or 5 year rates?

Cornonthecob

3 year fixed - 5.39% - £1,120
5 year fixed - 5.14% - £1,095

simon_or

I think you may be focusing on the wrong thing by comparing rates, given your plans to move next year. If that plan is more-likely-than-not -

- if you're ultra confident of being able to port and borrow what you need. eg your financial affairs are very simple (you're a salaryman on a permanent contract) and your total borrowing will be well within your means (2-3 times income for instance), only then consider a fix. Otherwise you could end up in a situation where your current bank will not give you what you need and you'll need to pay a large ERC to change banks.

- if you're doubtful about being able to port, then get a zero or very-low penalty tracker

EnterUserName

We're in a similar position and we're going for a 2 year tracker at BEBR + 0.15%

No ERC and no exit fee = flexibility

MFWannabe

How definite is it you will move next year? If it is highly likely then tracker may be best bet, however no one knows what the base rate is going to be by this time next year 
Also is there an ERC on the tracker? 

If you’re going for a fix personally i’d choose the 3 year 

KSS1991

We've just bought a house and chose a tracker rate for now. Base rate + 0.45%. Hoping for rates to fall next year 🤞🤞 

anon_2020

Those rates you've quoted look low enough that they're probably retention rates, ie your fix is coming to an end and these are the options that are available to you *from your current lender*. 

What you need to do is understand your current lender's policy on porting. If you were to move, would they let you take any remaining term on your chosen fixed rate over to your new property? Just give them a call and ask. Make sure to think about other variables (eg will it be the same people on the next mortgage or will you be adding a partner?) and ask about those too.

You also need to consider affordability, as has already been said. But I think 2-3x income is very conservative and you would usually be safe up to at least 3.5x unless you have other debts/multiple dependants.

You'd have to take a chance that their policy won't change, but this should be fairly certain over the medium term. If they would allow you to move the rate without paying a penalty, I personally would go with a fix.

D4ndo999

Advice needed on what would be the best option. 

Fixed or tracker

Fixed is at 6.1% and £1722pcm

Tracker is base rate +0.39% and £1632

My adverse credit has obviously accounted for the higher rates we've been offered.

Thanks in advance