Fixed v tracker in current climate

BrOz

Ive had an offer accepted on a house for 225k.

Going through the final stages of a divorce and the consent order has 125k in it which i currently cant access until all approved by judge. It should be accepted but paperwork still not sent off and I hear it can take 4 -10 weeks to be approved.

As a last resort a family member can loan me 35k payable on receipt of divorce funds.

So I either have a deposit of 125k or 35k. But most likely 35k at present because i cant wait around for the divorce money to come through.

I need the house purchase to go through ASAP as at risk of homelessness (landlord has told me they plan to put house up for sale, although no eviction notice yet.)

I just want to be in my own house again and out of this stress, not paying dead money on rent and wondering of ill get an eviction notice soon.

Interest rates are going up on houses.

My options are:

35k deposit

A) 2 year fixed deal at 5.04% =£998 a month repayment £100 set up fee. Issue is when the divorce money comes through i will be subject to early repayment charges if i pay over pay with divorce money which i want to avoid. So I could put all that money in savings but im still paying a higher interest on this so loosing out.

B) 2 year tracker deal 4.29% = £911 monthly repayment £999 set up fee. I can overpay and no early repayment fees when the divorce money comes through.

I am mindful the tracker can go up and down, but I worry its more likely to go up... but by how much in 2 years?

If i go with option B after making the overpayment can they recalculate my monthly repayment again so that it is lower?

I feel more comfortable having lower repayments, with the option to over pay as I would like to have another child in the future and maternity leave will impact my income. I also like to have lots of wiggle room just in case.

A deposit of 125k means my monthly repayments are a lot less (under £500 a month) and the fixed rate and tracker rate are closer eg; tracker 4.45% fixed 4.77%

I work full time approx £3000 a month after tax and NI

I would appreciate people's thoughts on this.

El_Torro

All signs are pointing to interest rates going up in the coming months. What's happening in the Middle East isn't helping and the fact that the US recently increased their rates probably means that Europe (including the UK) is soon to follow.

What interest rates will do over the next 2 years is anyone's guess. I would suggest that if the fixed deal is manageable for you then I would go with that. Chances are you'll pay less over the two years if you go with the tracker (just my opinion) but we don't know what will happen for sure.

poseidon1

Suggest you try and tune into whats happening geopolitically ( the Iran war ) and domestically (rising gilt yields), which is already impacting on fixed rate mortgages costs ( they are getting more expensive) and trackers which will move up as the Bank of England is forced to raise rates to combat inflation caused by factors domestically and abroad.

If you have no flexibility to cope with unknown rising mortgage payments from a B of E linked tracker, then the sensible approach must be a fixed rate where your outgoings are predictable.

You are currently looking at 2 year fix at a high fee, what are the rates open to you for 5 years fix with or without fees?

Bear in mind many mortgages allow you to repay up to 10% of borrowings annually with no penalty, you could have the flexibility with a 5 year fix of making a substantial 5 year reduction to your borrowings from the eventual divorce settlement without incurring any penalties, but benefiting from fixed outgoings you can comfortably budget for.

You would also have the financial security of your divorce settlement in the bank for longer (earning you a return) rather than to have all your accessible capital locked up in your non income producing home as enhanced equity. Think about how long it would take you to rebuild the divorce money as cash savings from your taxed earnings.

In any event if you are anxious to get your own place ASAP, would be prudent not to bank on early access to the divorce settlement, and concentrate on your £35k deposit plan B.

amnblog

Can you not,

1. Take a fixed rate for the balance you intend to keep longer term.

2. Take a tracker on the rest (ideally with no product fee) with no early repayment charge, This being the balance you can pay off when the divorce funds arrive.

Some lenders will only off not early repayment charges on a tracker is you have paid the product fee, but you get the idea.

CaptainWales

I've heard that the OECD's report today suggests that interest rates might go down to 3.5% next year. Obviously don't want to get anybody's hopes up but that may make trackers more attractive, yes?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82146198#Comment_82146198

Very much doubt OECD made that forecast.

Please provide your source as long as its not the Daily Telegraph, who I see is the only 'news' media deliberately trying to misquote the OECD who merely suggested that the UK should cut rates rather than forecasting it will happen.

Economists, financial markets and Sonia futures all predicting B of E interest rate rises next year.

We will see whether the wider financial markets are right soon enough.

poseidon1

For those considering tracker mortgages, this distinct change of tone from the B of E's governor should be noted -

https://www.reuters.com/world/uk/boes-bailey-says-high-energy-prices-make-it-harder-leave-rates-hold-2026-09-25/

The Iran war is beginning to have all the makings of yet another American 'forever war', so the energy crisis and its knock on effect on just about all economic activity, looks to continue for some while to come.