Mortgages - Fix or Flex?

phillenium2008

Hi there,

I am a first time buyer with a sizeable deposit to put down (£20k), looking to buy a property in the region of £140k. I am looking to buy in the South East (Portsmouth). I have not noticed any large drops in house prices, but some plateaux perhaps.

Anyway, I am looking at mortgages, with the Golden Question, go for a fixed deal, or a tracker deal?

I can afford monthly payments up to £800pcm.

I have looked at HSBC as they offer good deals.

However, with the market the way it is, it seems like interest rates are going down, but these rates don't seem to be being passed on to mortgage customers.

Is it worth going for a 2 or 3 year fixed deal, so that I know I am covered whatever interest rates do over this period, by which time the market will have settled hopefully.

Or do I take a risk, and gamble that Interest Rates are going to go down, as they are likely to (?). If tracker rates go up to 6.5% then I should be OK, but above that things will get tight.

Clearly the advice is if you are close to what you can already afford then fix your deal, but the money to be saved by going for a tracker with falling interest rates is good?

Thoughts?

ziknik

There’s a dead simple answer to your question in my view.

Can you afford to take the risk on interest rates?

If yes, go with the tracker.

If no, go with the fixed.

For what it’s worth, I think interest rates are way too low. We have got a big inflation problem. People are starting to notice the cost of fuel and food rise very quickly. Therefore interest rates should be hiked.

Having said that, I’ve been saying the same thing since September and we’ve seen 3 interest rate cuts since then.

Then again, the Bank of England admitted that they will exceed their inflation margin this earlier this month, so maybe I was right all the long.

http://www.bankofengland.co.uk/publications/inflationreport/ir08may.pdf

Best of luck

JonnyBravo

ziknik wrote: »

There’s a dead simple answer to your question in my view.

Can you afford to take the risk on interest rates?

If yes, go with the tracker.

If no, go with the fixed.

Agreed.

IMHO the OP doesn't have anywhere near enough leeway to think about flexible.

eg £120k borrowed. 5.75%. 25 yrs = c £750/month.
Not much wriggle room til you hit your max of £800/month

so.....
Fix it.
For how long? Well current thinking seems to be the fees are making 2/3 yr fixes uncompetitive..... have a look round at 5 yr fixes.