Fixed or tracker. . .

breaking80

Hello everyone 

Due to reach end of current mortgage fixed term at the end of the year - current rate ending is 1.1% (£1100 / month)
Current provider has offered a range of fixed deals; 2yr @ 6.5% to 10yr @ 5.5%

House value £450k 
Mortgage £225k
Remaining term - 18 years

Other deals available with major lenders at 5.84% for 2yr fixed 

My gut feel is;

Increase term to 25 years +
Move to a tracker - current offers are around 5.39% (5.25 + 0.14)
 
I know the base rate could go up but we have an almost 1% to gap before they get to the 6.5% offered by current lender, and almost 0.5% gap to best fixed rates from other providers. 

In addition, we are looking at options to move house next year - properties approx £350 - 425k value - so tracker with no ERCs and exit fees would be beneficial if we go ahead with this. 

Is there anything else I should be considering? Anything you would advise strongly against / for / us to think about? Thanks in advance

housebuyer143

I feel at this stage a tracker is the way to go. The margin in fixed and trackers is a lot and I'm not sure the base rate is topping 6%, but that's my own opinion.

TheAble

I would also side with a tracker. Note though that if rates do start nudging up, so might fixed rates; that is, if base rate does increase 1% and things start to hurt, you shouldn't necessarily expect to be able to jump off your tracker and onto a fix at 6.5% - the new fixed rate at that point might be 7.5%. So if affordability in the event of a rate rise could be a problem for you, you should consider the certainty that a fixed rate brings.

Maka344

TheAble said:

I would also side with a tracker. Note though that if rates do start nudging up, so might fixed rates; that is, if base rate does increase 1% and things start to hurt, you shouldn't necessarily expect to be able to jump off your tracker and onto a fix at 6.5% - the new fixed rate at that point might be 7.5%. So if affordability in the event of a rate rise could be a problem for you, you should consider the certainty that a fixed rate brings.

Agreed, I think it is more about catching the savings on the way down. 

We're in the same position and looking at a discounted variable without an ERC with Clydesdale, leaving us free to jump on a better deal should we need to.