To fix or not to fix (ie, tracker)

MagicMoneyTree81

I’m interested in people’s thoughts on the wisdom of a 5 year fix versus tracker in the current climate, especially in light of today’s inflation figures.

I locked in a 5 year fix with Virgin Money, my current provider, and it expires today. Rates with Virgin have since risen. Current deal moves to SVR at the end of the month. It’s decision time.

Don't fancy a 2 year fix because it’s higher payments and on that time horizon, who knows what geopolitical crises could set inflation soaring again.

Terms on my LTV of roughly 55%:

5 year fix

·        3.88%

·        770 a month repayment (£113 higher than my expiring deal)

·        £1,495 product fee – added to loan (I’m hoping to overpay a little here and there to pay off the product fee by the end of 5 years)

Freedom to fix (no early repayment charge to switch):

·        Initial: 5.48%. Base rate + 0.23%

·        Initial monthly repayment: £900

·        Product fee £995 (added to loan)

I’m quite risk-averse by nature so probably going 5 year fix. I can also readily afford £770 even though it is £113 higher than my current payment and my finances are not great.

3.88% is also, historically, pretty good and banks will surely have priced in the strong odds of falling rates into the terms they’re offering. It’s all gambling at the end of the day, and if you bet on Man City to win the league, the odds are going to be very short anyway?

I guess I’m only asking if my analysis is off beam and/or anyone thinks, on balance, a tracker is a good move.

 

fergie_

I think you have already answered your own questions.

Tracker is only wise if you think mortgage rates will go lower than 3.88% in the short term. Otherwise you are paying a fee plus an extra £130 a month for the potential risk of having to either sit it out or bail onto a higher rate.

Hoenir

Take the tracker and overpay. 

The days of low mortgage rates are over. Good while they lasted. New era is here to stay.