Remortgage due 31/12/2023, should I go on tracker/variable rate until the decrease further?

Me remortgage is due to start at the end of the month. With rates decreasing quite a lot, do you think it is wise for me to go onto a tracker variable rate for a while as this seems to be the direction they are going in?

My payments are increasing by £900, to £2250 so I am looking to make this as low as possible.

Comments

  • fergie_
    fergie_ Posts: 155
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    Its an absolute gamble (which I'm considering), but what you need to look at is the conditions for a tracker (ie fees, switching off it etc) and compare to where rates are going.

    Currently trackers seem to be a lot more expensive than 5y and 2y fixes.
  • london21
    london21 Posts: 2,089
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    I have thought of the same but for now think I am opting for 2 years fix without product fees.

    The tracker with my current lender does not have no product fees.

    The next BOE meeting is on the 1st Feb and same day my current fix ends.

    I have an appointment booked for 11th Jan. Inflation figures will be out on Wednesday 20/12 so that might also bring rates down a bit.

    Currently opting for 2 years fix at 5.1% 65% LTV with virgin money. 
  • I'm in similar position, current fix with NatWest ending 31st December. I booked in a 5yr fix in July at 6.05%, rates dropped and I rebooked in September at about 5.5%. Now they're down to 4.9% for a 5yr, but I've just instructed my broker to swap me to their 2yr fix at 5.2% instead (all zero arrangement fee).

    I've run the numbers and, for me, as long as rates are 4.5% or lower by March 2026, the 2yr fix followed by another at that rate works out cheaper. But more importantly is the flexibility - the ERCs are obviously lower with the 2yr fix. Natwest have been clever with their ERCs recently and made them reduce in a non linear fashion on 5yr fixes. So until the 4th year of the term the ERC is still 4%. I suspect that's about the time many borrowers will be looking at what's on offer then and realising it's not worth stomaching the ERC to get a better deal.

    Three years ago I was 2yrs into my current 5yr fix at 2.6% and Nawest were advertising fixes of less than 1%. I very nearly coughed up the ERC to refix early as it would have worked out the same cost overall. but given me an extra couple of years at a super low rate. But as there was no sign of interest rates rising at that point I decided it wasn't worth the hassle. But now that's made me a extra wary of getting trapped into another 5yr fix if rates are on the way down.

    Natwest's tracker is 6.2% for 2yrs, so quite a bit higher than their fixed rate, and no sign yet of the base rate coming down. Swap rates are obviously doing their own thing at the moment, so the fixed rate offers appear to be tumbling. I was toying with the idea of not refixing at all and going onto the SVR (8.25%) for a couple of months, in anticipation of further rate reductions early next year. But that feels like a bit of a high stakes gamble as it'll only take a few months before the extra interest of the SVR cancels out any future savings from a lower rate fix.

    Obviously, all of the above is based on the assumption that fixed rates will keep on falling. That seems to be what all the predictions are, so the caveat is that what we're seeing right now is swap/fixes bottoming out - they might not go much lower for years. It may be just wishful thinking that some people are hopeful of them dropping back towards the super low rates of the last decade. But my instinct is telling me that they probably won't do a double bounce and start increasing again next year.  :#


  • SuseOrm
    SuseOrm Posts: 480
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    Whilst I do think the rates will drop a little bit, we have to realise that actually 5% is normal what we’ve experienced previously has been crisis rates.  
  • london21
    london21 Posts: 2,089
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    Definitely not 5 years fix.

    think rates will go down later in 2024 but my current dic ends 01/02.

    banks milking the situation 
  • fergie_
    fergie_ Posts: 155
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    Natwest's tracker is 6.2% for 2yrs, so quite a bit higher than their fixed rate, and no sign yet of the base rate coming down. Swap rates are obviously doing their own thing at the moment, so the fixed rate offers appear to be tumbling. I was toying with the idea of not refixing at all and going onto the SVR (8.25%) for a couple of months, in anticipation of further rate reductions early next year. But that feels like a bit of a high stakes gamble as it'll only take a few months before the extra interest of the SVR cancels out any future savings from a lower rate fix.

    The Natwest tracker now lets you swap to a fix at any point without penalty. Even if the fixed rates drop a couple of points in January, paying 6.2% for a month would definitely be worthwhile. However, if you hold out too long, it becomes a false economy.

    With swaps continuing to fall, 4% for 2-5 years becomes tempting.
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