Can anyone give a first time buyer a bit of advice over which mortgage to choose please?

[JackiePaper]

we have been accepted onto a govmt scheme for key workers, in which basically the government lend us a 40% deposit interest free. my question is whether we are best off getting a tracker mortgage at 2% above base rate, a discounted standard variable rate (3.5% for 5yrs then onto the svr - currently 4.5%) or a fixed rate at 6%.

Also would someone be able to explain the difference between the svr and the tracker to me? why would you go for the svr over the tracker? is the svr less likely to change as interest rates change or not?

any help/advice greatly appreciated! thankyou

[lalalonglegs]

Fixed rate at 6% is crap rate but I would recommend finding a decent fixed at the moment as base rate will rise soon(ish) so mortgage will go up. Discounted will only stay at 3.5% for as long as base rate/svr is low, same as tracker. Shop around.

Standard variable rate is the amount of interest the bank will charge you if you are not tied into one of their deals (discount, fixed etc). Traditionally this has been not a very favourable rate but for the moment it's generally quite good because interest rates are so low. Discounted mortgages are based on this.

Tracker rates follow the base rate (set by the Bank of England) and should reflect every move that the BoE makes - sometimes in the past banks have not altered their SVR even though base rate has been reduced by the BoE. SVR always goes up when base rate does but has not always come down again so, imo, it would be better to get a tracker if it weren't for the fact that they are artificially low at the moment and likely to go up at some point.

[notanickname]

Also look into any tie-in period after the end of your deal. You don't want to end up with eg a fixed rate that ends and then be tied into their standard variable rate afterwards.

[lalalonglegs]

Yes, good one - and try to avoid being tied into getting insurance with same company.

[JackiePaper]

unfortunately we are restricted to getting our mortgage through the co-op, so can't shop around for better rates. i am reluctant to go for the fixed rate because it is so high, am thinking the tracker is probably the best?

[nannynick]

I was a First Time Buyer when I brought my current property. What I liked about the fixed rate mortgage was that I could budget for it, I knew how much every month it would be. Sure it was not the best rate... but it also didn't change.
Having now been in my property quite a while, I have been able to re-mortgage and get a better rate - but I am still on fixed rate repayment, as I like knowing how much it is costing me each month.
While I may be paying over the odds at the moment, I am not in the situation of being worried about what happens when the interest rates go up (they have to go up at some point, don't they?).