Discount vs Tracker

lisyloo

Hi Debbie,

It's really difficult at the moment to decide between tracker and fixed.
Make sure you add up ALL the fees.
The main ones are valuation, legal, application and exit fees (with current lender).
Smaller ones are CHAPS fee (for money transfer) and sometimes a small admin fee for not taking their home insurance (not that common these days but I've still seen it).

Make sure you also consider how many years the fees are over.
e.g. I'm apying £860 for a 10 year deal.
That sounds like a lot but it's only £86 per year.

Bear in mind that if you take 2 year deals you will need to pay 5 lots of fees compared with one 10 year deal.

One way to compare mortgages is to include the fees in the rate.

e.g. Fees/number of years / capital *100 = addtion to rate.

example

£2000 fees for 2 years is £1000 per year.
If you have £100,000 loan then this is 1% that you need to add on to the rate.

This isn't a bad way to do it because this way you can compare 2, 5 and 10 year deals.

It's not totally mathematically precise as capital falls over time but in my view it's a good enough very close approximtion.

Gorgeous_George

Newbird wrote: »

:question: Curious as to what this thinking is based around GG.

That's not to say that I'm disagreeing, or willing to stick my neck out that far with you just yet...I'm just pondering this and wondering if your thoughts are politically or economically based?
PM me if you prefer...

I think that raising the base rate by 0.25% will see thousands more people repossessed. By 1% and maybe we are looking at 100,000's. 2% will bring unimaginable misery to upwards of half a million families. That is a lot of votes to lose.

I think inflation will be allowed to rise rather than interest rates.

That said, if I was in the market for a remortgage, Britannia's 6.14% fixed for 10 years could tempt me.

GG

Newbird

Thx for that GG - You would fix for 10yrs at that? It's a good rate (if still available) granted, but 10years?
I remember you've said before that would be long enough to see you mortg free, but do you think fixing for that long will beat trackers? or is it that you want the stability?

Gorgeous_George

Almost certainly. As recession kicks in and inflation rises, interest rates will rise worldwide and the UK is traditionally higher than most other developed countries.

With the Labour party being about as popular as woodworm in Jake the Peg's leg, it is increasingly likely that we will suffer the Tories for most of the next ten years and we all know where they like to keep interest rates.

GG

Newbird

GG - Do you think it will be different tho in this new situation under a T govt.? as the drivers for the credit crunch are different from the causes of the boom and bust that went on in the early 80s & 90s...This govt. did inherit a relatively healthy home economy after the previous storms had settled down. Also a new T govt. will be much less 'Old School' than it was in the Thatcher/Major years, don't you think?

I'm (optimistically?) hoping for a change for the better with a new govt.- the doom n gloom is so depressing right now. I know it will take time, but I gotta have something to hope for...I accept that the property market is cyclical, like everything else. Just wondering how low we gonna have go before the tide turns..

It's easy for everyone to preach the doom and gloom, not talking property prices here (I'm with the doom n gloomers there) as much as base rates and inflation...

I'm quite prepared to sit out the HPC, I'm more worried about base rates, hence my Fixed/Tracker dilemma, altho this dilemma is disappearing as fast as the decent fixed rate offers disappear, (looking for new mortg, not re-mortg.) so I won't have the choice!

Hmmm :think: Yes, I suppose I am an optimist.

I'm just naturally looking for when the upturn may occur, or if it's feasible that the doom sayers are over hyping the situation and if so by how much?