To worry that a tracker mortgage instead of fixed is a bit of a gamble in the current economic climate?

[MilaMae]

Sooo it's time to re-mortgage.

Dp has never forgiven me for last time when I insisted on a fixed rate. He's really keen on going for a tracker this time but I think it's a bit of a gamble.I don't trust GO or The Bank of England and worry that if needs be they will just wack rates up when it suits.The Greece/Euro thing scares me too.We seem to be living in unsettled times.

Having said all that I'm aware I'm pretty clueless re economics and I'm a big fat scardy cat ie I like to know exactly where I am re finances.

Soooo what do others think?Would a tracker be risky in this climate or do you think it would be foolish not to take advantage of low interest rates(they're much cheaper at the moment than fixed).

tia

Depends entirely on your circumstances. If you have plenty of bunce in your budget & could cope financially with interest rates going up at some point then a tracker could be a good option and you may get a good deal to start with because rates are low. OTOH If your finances are finely balanced and you want the certainty of paying the same amount each month, a fixed rate can give you greater peace of mind. I tend to go short-term fixed - 3 to 5 years typically - as I lived through the nineties when rates shot up past 10% and wouldn't like to cope with that again . :)

We have a bit of slack but not plenty of bunce.

I know what you mean about the 10% thing,tis a tough call.

I don't see much point in a 2 or 3 year fix. Interest rates will probably be going up just as your fixed rate expires.

You're right Mrs. Hmmm we only wanted 2 or 3 years fixed or longer if no get out penalties(unlikely).

However I'm scared we could wake up one day to doubled interest rates.

Tracker rates you can get today are nowhere near the base-rate of 0.5%. Many of the ones you could get after 2008 stopped tracking when rates got below 4% or so on the way down. It was only if you were lucky enough to be on an existing variable rate that you could enjoy super-low rates.. So even if rates go up ten-fold to 5%, the tracker will probably only go up a percent or two.

Oh really Cogito, I didn't realise that,that makes them seem a little less scary.Thanks

I have been thinking this for over a year now. 1/3 of our mortgage is on a life time tracker of 0.5% over base and 2/3 on a tracker of 2.99% over base (not sure for how long).

Our interest only mortgage is £350, if I changed to a fixed I would be paying more than 3 times the amount I do now. However, if the interest rates go up only to 4% I will wish I had a fixed rate mortgage.

The issue is that fixed rate mortgages are for 2 years max and then tie you in for a further 2 years. The base rate currently is still likely to remain low (not necessarily 0.5%) for at least another 12 months because the country is in such a mess. Therefore, the way I look at it, the benefits of fixing are not seen for another 18months or more - just as your fixed rate expires. So why fix?

Why fix... because you really can't say for certain that the base rate is likely to remain low. It certainly looks that way at the moment but things can change rapidly. e.g. I fixed in 2008 just before the rates plummeted. Few anticipated that at the time.

Cogito that's when I insisted on fixed(and dp has never let me forget it) ,hence my sounding out a few Mumsnetters.

I just have a baaaaad feeling re rates and the economy. The Greece thing is scaring me too(no idea if it should do or not but it is).

I know absolutely nothing re all things financial but I can't help this nagging feel that the shit is yet to hit the fan iykwim and we should hunker down and play our cards as safe as we can.

Obviously dp is citing deja vue

We fixed end of 2007 - and a lot of our friends at time did predict fall in rates and were vocal in their opinions. Thing is we couldn't afford the house if the rates went up and with young DC were unwilling to take the risk.

Perhaps you should play around with numbers a bit - see how much the rates would have to increase by before you really struggles to pay the mortgage. Then do bit of research and decide how likely that is?

You could see if any lenders would let you do part tracker, part fixed . Then you are hedging your bets.

why don't you just go on to your svr for a few months to see what will happen with greece etc (which I agree with you about btw - very scary atm), then you are free to fix if interest rates do start to look like they will go up. IMO I don;t think they'll go up until autumn/winter 2012.

I fixed May 2009 when the talk was very similar to now - gotta get a fix etc - bad mistake on my part and I now take everything mortgage experts (yes Ray Bolger I talking about you) say with a large pinch of salt - they have no more clue than I do.

We got a 10 year fixed rate at 5% in 2007, it has obviously cost us a lot of money so far, but I really like the fact that we know exactly how much we will be paying regardless of what happens in world economics!

Check your SVR very carefully as we took our mortgage in 2008 and our SVR is 1% over Bank of England base. We figure we will never get a rate as good as this anywhere else and have stuck with this. We do over pay currently at the level when Bank of England was 5%, this is building us either a buffer zone or a shorter mortgage.

i think the key is not to look at the rates if you choose a fix.
we have always gone for a fix, as IMO the peace of mind that buys is priceless. you are paying for the certainty that you will be able to meet your mortgage payments, which if you are a worrier like me is a real sanity saver.

OTOH, rates are highly unlikely to go up by more than 1/4 percent at each review, so add up all those quarters over the lifetime of the tracker product, and then see how affordable that looks.