Tracker or Fixed in current climate?

snarffie

MWOOLY10 wrote: »

According to my mortgage advisor he thinks there will be one more interest rate drop then it will stay there for a while but eventually it will start to slowly rise again.. Hence why he advised me to take a fixed rate mortgage

I didn't think that mortgage advisors were supposed to advise in this way, as they have no basis beyond the finger-in-the-air method to judge interest rate changes.

I mean, even 'proper' economists can't agree on the next base rate change.

Good luck with your choice though, A five year fix gives you certainty, and is, in my opinion better than fixing every two years (with the associated fees), which is what I've been doing for the last six years :rolleyes:

UK007BullDog

It is not about the economy out there.

Its about:

1. Do you want to make sure that your monthly payment is the same for the next couple of years (2,3,5,10 or 25)? You want to be able to budget? Your monthly payments will be the same every month, no matter what happens with the economy.

2. Should the interest rate go up by 1, 2, 3, 4 or 5 percent, would you still be able to afford your monthly payments? (We will ignore the fact that rates could fall.) What if the interest rate were to reach 15%? Of course you could fix if rates were to creep up, however this means paying a product fee and an early repayment penalty fee.

So, are you a.....

1. a secure fixer?
2. a tracker gambler?

snarffie

UK007BullDog wrote: »

So, are you a.....

1. a secure fixer?
2. a tracker gambler?

...although, I suppose that the 'security' of a fix depends on the term. Remember that you will at some point have to come out of a fixed rate into the interest rate/economic climate of the day, so a two year fix may be as much of a gamble as a decent tracker rate, particularly a lifetime tracker.

eg
2 year fix with £500 product fee.
At the end of the fix, you have to pay a new product fee to fix again, so cough up another £500. And rates may actually go down. You have to gamble on that. And it gets worse if you need to change lenders because yours now only offers pants rates to you as a loyal existing borrower.

eg
lifetime tracker with £500 product fee.
After two years you continue with the tracker, with no fees, putting you immediately £500 ahead. Interest rates would have to rise by 0.5% from day one for two years to lose out in the same two years, based on a 100k mortgage over 15 years (my term). Of course, if IR goes up by 1% from day one, and stays there for the whole two years, you'd lose out to the tune of £500.

It is a gamble either way, and depends on your cirumstances, as you say.

ixwood

I don;t agree. I'm a "fixed gambler". I've fixed for 10 years gambling that my 5.15 will be lower than non fixed on avergae over the 10 years. I personally think the odds are on my side, but either way I could "win" more than I could "lose" imo.

MWOOLY10

snarffie wrote: »

I didn't think that mortgage advisors were supposed to advise in this way, as they have no basis beyond the finger-in-the-air method to judge interest rate changes.

I mean, even 'proper' economists can't agree on the next base rate change.

Good luck with your choice though, A five year fix gives you certainty, and is, in my opinion better than fixing every two years (with the associated fees), which is what I've been doing for the last six years :rolleyes:

Hes a friend as well as my advisor.. and he wasnt advising me on that as much as it was just his opinion of what was going to happen
But i'm the same least now i know what im paying for the next 5 yrs.. as with this climate anything can happen but at least i know if anything should happen i know exactly to the pound how much i need to earn each month