Tracker Mortgages

Cnkp21

Hi 

my mortgage is due for renewal on 30th November and on the 21st June 2023 I secured a new fixed rate mortgage with my current provider at 5.33%. My existing rate is 0.97%, therefore there is a significant increase in my mortgage payments. 

I have been keeping a close eye on the interest rate in the hope that it won’t go much higher and over the last days there have been reports that the interest rate may stay at 5.25% again next month. I am hoping this will encourage lenders to reduce the rates further before my new deal starts. 

I will have to go with my existing lender with the timescales involved, however they also offer a tracker deal at 5.39% with a £999 fee attached. This would mean only slightly higher monthly payments than with the fixed rate. 

I am not massively familiar with a tracker mortgage as I have always opted for a fixed rate deal, however I am thinking that if the interest rate has peaked and will start to go down over the next two years then a tracker deal may be the better option in the long run. 

My mortgage advisor isn’t giving me much help with this query, therefore I would be most grateful if someone could advise on my best option. 

Many thanks 

Chris

Bigphil1474

We had a tracker for years and it worked great when interest rates were low. We paid it off a couple of years ago, but it was something like 1.4% above base rate, so would now be paying nearly 7%, as opposed to less than 2% previously.

Tracker mortgages are an educated guess with a bit of crystal ball thinking - if you think interest rates will stay level or go down, and they do, they will work in your favour. Unfortunately, nobody really knows. The fixed rate will give you some peace of mind, whereas the tracker is a bit of a gamble. If the the whole middle east kicks off, then we might see prices starting rising quicker again and interest rates might start going up again. If the Ukraine war resolves itself, prices should come down, and interest rates might follow.  On the flip side, if rates do fall quickly, you'd be stuck with a higher interest rate on the fixed deal - it's really down to what suits you best.

amnblog

Your mortgage adviser if trying to avoid a hole in their foot Chris.

If rates go up once you are on the tracker, they do not want to be in the firing line.

The tracker carries that risk and you need to understand that risk and know you can pay more interest if you are wrong.

Most Lenders five year fixed rates are currently lower than their two year fixed rates which suggests they believe rates will drop. 

If your intended Lender offers a simple switch to fix option from their tracker rates, that is a good get out.

Cnkp21

Thanks BigPhil and Amnblog. I appreciate your help 👍

london21

Hard to predict the future but my deal ends 02/2024 and have a rate secured and keeping my eyes out to see what happens

I was going to opt for tracker but now opted for 2 years fix with no product fee 5.59%.

Virgin money does offer freedom to fix tracker which is currently 5.48% with £995 product fee but when fixing if rates drop another product fee possible. 

BOE next meeting is Thursday 2nd November maybe rates will stay the same again.