Expert help needed - fixed or tracker??

[CrazyOVERbaby]

Hello

My hubby and I are due to re-mortgage in a few weeks and have been offered two deals we are happy with - a 2 year fixed at 4.09% and a 2 year tracker at 2.49% above base rate, with the option of switching to a tracker any time after the first 3 months.

We have ALWAYS stuck to a fixed rate as we like to know where we are at with our money. But, we have been really stung with our last fixed rate mortgage - when everyone else was reaping the (dubious) benefits of falling interest rates, we were stuck with sky high payments.

So, what should we do? The tracker would save us approx £180 per month based on current rates. But will rates stay like this??? Should we gamble? Please help!!

If they do rise, they're not going to rise so much in the next 3 months that you won't benefit from the tracker now and a switch later to a fixed if/when you get a bit more nervous. The fixed rate may not be 4.09% when you get round to switching though. Any arrangement fees that you need to factor in?

Just £199, but we wouldn't tack them on to the mortgage. I'm nervous about interest rates - never been much of a gambler!! It would be just our luck to miss the boat again and see our mortgage payments rocket back to what they were!

I don't know what teh base rate is atm so how does the tracker compare really to teh fixed rate?

The BoE could reduce the repo rate to zero but is more likely to do further QE if they feel recession is again likely. So I don't see the tracker rate going down.

Assuming the BoE started raising rates in Jan next year (unlikely to get rate hike this year) and raised rates 25bp every other month to 3% by the end of your 2-year period, then the repayments on both fixed an and tracker would be broadly equivalent.

So do you see rates being above or below 3% in Sep 2012? Right now many would say lower and many would argue for no rate hikes at all in 2011.

The tracker is likely to be cheaper but riskier (2y is a long time in markets). My personal view would be to get a fixed-rate mortgage but longer than 2-years ... preferably 10y+.

Shite. I hate money stuff. Have no idea what to do.

9 months ago I fixed for 7 years at 5% (80% LTV). Starting to regret it now, however, due to commentators talking about ultra low interest rates for years to come. However, a lot can happen between now and 2016.

In your shoes now, I'd probably opt for a low rate tracker nd keep one eye on the rates and fix for 7-10 years as soon as I saw an upwards trend in base rate.

I'm really nervous. Any other advice good mumsnetters??

Crazy, you don't mention what your current deal will revert to when it ends. What SVR will you end up on if you DON'T remortgage? I suspect that will be lower that your current fixed rate so you'll make savings straight away. Then you can wait and see how things pan out with the economy and interest rates, and switch when you think the base rate is going to go up.

I do not think 2.49% is a good deal, (You are on a deal that is 2% above Bank of England rate) Rates only have to go up and your monthly payments could be prohibitive.
Have you looked at other fixed rate deals out there, Call an IFA and ask what is out there, they should be able to give you a quick indication.
You say that you prefer fixed rates as you always like to know where you are with your money. You cannot worry about what other people pay but think of what your circumstances dictate. So what if a fixed rate is more? That is what you pay for the security of mortgage price.