Downwards trend for Base Rate

bootybounty12

I'm fairly new to all of this, but after lots of research and reading countless industry predictions, it seems pretty certain that the base rate is on a downward trend for the next few years. 

With this in mind, and my main priority being keeping monthly repayment cost down, it seems a pretty obvious decision as I'm currently remortgaging with same provider, to switch to a Tracker rate for 2 years?

Tracker is slightly more expensive currently than a fixed 2 year deal (say £60 monthly more expensive currently) but given the countless articles and predictions on the falling base rate, the tracker mortgage option looks like it could potentially be hundreds cheaper by 2027/2028. Obviously if rates continue to fall... but I'd say it's worth the gamble, unless I'm missing something really obvious?

Also early repayment fees are less on the tracker... And product fee is less!

Thanks for your help.  

lfc321

Yes - that is the advantage of a tracker: if rates do indeed keep going down, so will your payments.
The downside is that, if predictions are wrong and the base rate stays the same or goes up, you will be paying more than on a fixed product.
It's a choice, and at least in part a gamble. You will only know afterwards whether you made the right choice.

For some people the certainty of a fixed rate is important and worth it, even if you do end up paying slightly more. That may or may not apply to you.

El_Torro

Your reasoning sounds logical. Of course the predictions could be wrong, when was the last time 2 years went by without something unpredictable happening?

My main concern would be: Can you afford a tracker if interest rates go up? If not then I would probably play it safe and go with a fixed rate. 

I agree with you that interest rates will probably continue to reduce. None of us knows for sure though.

Hoenir

If you can predict future events with any certainty then you are in a class of your own. 

sheenas

The office for national statistics predicted above 4 percent till 2030 in the exchequer’s spring statement.

ACG

A 2 year deal is not very long.

You say a fixed rate is £60 a month cheaper but what is that in terms of rates? 

If it is 0.5% then chances are you will need to see 3 drops in the base rate before you see any sort of benefit on a monthly basis. What happens if they come at the half way mark? You will be worse off. 

Its all a gamble. Your basically paying £60 a month in the hope that you will be better off at the back end of the deal... It might pan out, it might not. 

bootybounty12

Thanks for your input all.

I should have said, going through a divorce, there's quite a high chance we will need to sell up and exit this mortgage during the term. ERC on the tracker is obviously much less than the fixed which is another very appealing option, combined with the downward trend of base rate falling.

I understand no one can predict the future, but judging by most predictions, the fall is set to continue and I'd only need another 2 x 0.25% base rate cuts to pretty much bring the tracker and fixed monthly repayments to the same amount, and 3 x 0.25% cuts to bring it cheaper in terms of monthly repayments. But then the big advantage is also the difference in ERC with the tracker, given our uncertain circumstances re selling and exiting a mortgage, and not wanting to port it anywhere else...


Tracker:
4.75% (Base rate + 0.5%) - Current monthly repayment £1930
ERC £3K

Fixed 
4.1% - Monthly repayment £1821
ERC - £8K

lfc321

I don't get your maths.

From the figures you give above it looks like the tracker is currently £109 more, not £60 as stated in the OP.

In terms of interest rates, the tracker is 0.65% higher, so you would need three 25 basis point cuts before it became cheaper than the fixed rate. 

The extra info in terms of ERC does change things, however: if your priority is actually a low ERC more than monthly payments, the tracker could still make sense.

bootybounty12

Correct - it is £109 more expensive per month on the tracker currently. I misremembered.

Like you say, I think that's my decision in a nutshell - on the tracker, we'd have a much cheaper ERC which is a priority for me and my partner, and (as I know, no one can predict anything fully) it is indeed looking like rates will continue to fall. So for a cheaper ERC and potentially a cheaper monthly repayment eventually, is the tracker worth the gamble. 

If anyone has a crystal ball would love to know. But I've literally found nothing to suggest rates will go up?! Obviously global crisis etc. not accounted for. 

bootybounty12

My only other thought is how I could find out whether Accord have already adjusted their fixed rates recently, or if indeed that was potentially about to happen soon. I saw other providers altered theirs recently but not sure how I can check whether that rate Accord are offering me, 4.1% on the fixed, has been a rate established for a while and that interest rate could potentially be subject to a change soon enough, therefore whether it's worth holding out for a few weeks without committing to anything to see if that happens to their fixed rates.

ACG

Lenders tweak their rates all the time. Accord have made changes recently, but so have other lenders which can then have a knock on effect. 

Taking the divorce out of the equation, I think I would fix personally (not professionally). But with the divorce, that is quite an important thing to not mention. I think that alters things and obviously the ERC is going to play a bigger part, in which case I think the Tracker makes more sense.