Re-negotiating mortgage. Fixed or tracker?

[LajesticVantrashell]

Our five year fixed mortgage went on to SVR at the beginning of April and with everything going on, we didn't re-negotiate it. We're going to do it this week.

We plumped for 5 year fixed when we bought the house as I'm normally very risk averse, but with the base rate being so low, would we be better going for a tracker for a few years? Current SVR is 4.75% so assume it would be much less than that?!

I am no expert at all but we're on a tracker and our interest payment has plummeted since covid, we're taking the opportunity to pay what we're saving off the capital and it's dropping fast. No idea what we'll do next year when it's time to renew, but DP doesn't think interest rates will rise hugely as people will need to be encouraged to borrow and spend.

We've never fixed and it's always been cheaper apart from one period of about 3 months in the last 25 years, currently on a lifetime deal we took out about 12 years ago paying less than 0.5%.

I also don't think base rates are going to rise in the short to medium term as there's just so much government, business and personal debt out there that significant rises would destroy an already fucked economy.

Having said that, it depends what rates are available on fixed and trackers, how much your mortgage is relative to your income and the remaining term. If you can get a long term low rate fix it might be worth having if the premium over variable is small.

Its so difficult to predict. Could you afford a much higher rate if it were to happen?

I ended up on a tracker as I was about to have a baby and couldn't be bothered with research that was 22 years ago now! The rates fell and fell and we were able to carry on paying the same, we even increased it when we could. Paying off over 5 years early.

But thats just one historic example. Who knows what will happen in the future. Depends on what risk you are in a position to take.

Tracker. Definitely. Interest rates won't be going up any time soon. Compare the cost of the fixed rate mortgage over the term and the tracker too. Now work out the tracker if interest rates go up 0.25% just to cover yourself. Maybe do some scenarios depending on the term: calculate a year at the current BoE base rate, a year assuming a base rate of 0.2%, etc. Don't forget to factor in the fee. Spreadsheets are your friend in this situation!