Tracker or Fixed term mortgage

[Unwell Cat]

My current mortgage deal has just expired and I'm unsure of whether to take out another 2yr fixed or try a 2yr tracker. The tracker is substancially less per month but if interest rates rise then obviously with each interest rate increase the difference will decrease.

Anybody on here know much about mortgages or whether large interest rates are expected over the next 2yrs (an impossible question to answer I know). If I take the tracker the interest rates would have to rise by 1% over the course of the 2yr tracker term to reach the same rate as the 2yr fixed I'm being offered. Any additonal increases over that 1% would mean I'm paying more per month than if I had taken the fixed term deal..

[charlesr]

A tracker is a risk which will either benefit from or learn from. If you are having to ask the question here though, then it's probably worth fixing.

It's worth going for the tracker if you are considering regular overpayments though (which anyone with any spare cash should be doing).

[Ginger Tosser]

Is it worth staying on the standard variable rate for the meantime, first sniff off a rate rise then go for a fixed term.

My crap deal (6% was good at the time) ends September, so I'm tempted to just wait and see. Problem I have is the low value of the mortgage and term. As it's 42k and 7 years the interest differential isn't great.

[Mayhem]

Have mortgage lenders brought down the interest rates for trackers now then? When our previous tracker expired last October, we were offered a new one at 6% (!) compared to 3.5% on the SVR for a new two year mortgage. No brainer there really as to which we took out for this two year period...

[Unwell Cat]

Tracker I'm being offered is 2.63% for 2yrs

[smouty]

I would take a higher interest rate for a longer period if one was available.
I not long moved onto a 5yr 2.90% when my previous deal came to an end and I stayed with Nat West so no fees.

[PeteJ]

My two year fixed ended in September last year, tried to fix it again but because my property value had decreased to below the borrowed amount, the interest rates were insane - 8%ish.

I've left it on a variable rate praying the interest rates don't surprise me.

[QualityChimp]

That's like asking "would you prefer to live the rest of your life only smelling onions or to have "copacabana" playing directly to your brain forever" - there's no right answer.

I had a tracker mortgage which kept dropping my repayments each month - that was great.

However, the only way is up, so my current mortgage is fixed for 5 years. I quite like the stability of being able to budget how much is going to need to be paid each month. It helps budgeting.

I bought my house when the market was at its lowest. I got a bloomin' bargain and it's luuurvely.

[112]

It's a very difficult question to answer for you, and a decision only you can make, as only you know if you can afford the gamble and if it is ultimately worth it........

I was on a variable/tracker one last year and as interest rates fell temporarily, it made the monthly repayments a bit more tolerable. But its one of those things really, where you save some money in one place, but then pay more else where...... kind of like a ying and yang balancing effect....... No one knows how the market will behave.

Safest bet is to work out your total out lay for a fixed term mortgage and work out if you can afford it 'comfortably.' Obviously you don't want to pay more than you have too, but like I said above, can you afford to take the gamble at this stage?

112

['Press Start']

Fix now people? heard the news last month that 1 person voted for a interest rate rise in their monthly votes. Looks like a rise soon in the distance. Thought I just post that!

[Finsbury Girl]

It's my view that depsite Swervin Mervyn's best efforts to avoid it, inflation will force the BOE's hand & an interest rate rise soon is inevitable. They'll only take 25 bps steps I think but the real question is where they see accommodative rates finish and mildly restrictive rates start. Inflation abating and UK growth are key to how high they go. My guess is we will not see official rates at the levels of 07/08.

So in answer to your question, with official rates where they are they can only go in one direction (and it is not down). Ultimately it is down to how high you think they'll go and how good a rate you can get.

[Skull Commander]

I would agree that interest rates have no where else to go instead of up, so fixed is the most sensibile option on my opinion. You will most likely get a decent rate, and it's maybe worth going for a longish period if possibile.

Personally I like the security of knowing how much I'm paying every month too, as my mortgage is pretty big and if I went on a tracker and there was a sudden large rate rise it would mean even more tightning of the belt in this already challenging financial climate.

[Psyduck]

Everyone expects interest rates to go up, as others have said, they can't go down and won't stay at 0.5% forever.

However, the banks know this, and so have priced that into their fixed rates already. The banks will have people with far more knowledge and research than people on here doing the pricing and so the prices for fixed vs variable will be priced pretty equally.

They will prefer not to have any risks, so the fixed option will be priced so they would expect it to be slightly more expensive for you over the term than the equivalent variable rate. That's because at a variable rate they're guaranteed more than the base rate, if they give you a fixed rate there's a chance rates will rise a lot and they'll lose out. But then again obviously you'd rather not have the risk of a variable rate!

So, as everyone has said, there's no "right" answer...rates will probably rise at some point over the next few years, but noone is sure by how much or when.

[Finsbury Girl]

Nah mate - they've got the same monkeys looking at the swap curves as everyone else. Ask 20 different economists/strategists about the rate path and you'll get 20 different answers.

[Psyduck]

If everyone's looking at the same curves why would they get different answers?!

Yep, I agree that there's lots of different opinions out there but the banks will be treading down the middle, and you're not gonna beat them by asking on a forum. Frankly, I don't think you're particularly likely to beat them by any method and that they'll be close enough to the middle that it's not worth worrying about trying.