Which mortgage to go with?

[southeastlady]

Hi, really not sure what to do; our fixed rate of 1.79% ends in April.

Our broker has found 2 options for us:

A 5 year fix with Virgin at 5.4%

or a 2 year tracker with NatWest that is BoE base rate plus 0.70%

Monthly payments on the fixed rate would be £450 a month more than the tracker (based on todays rate of course)

Seems to be a big gap between rates on fixed and trackers at the moment. Does that mean the general view is that soon enough the trackers will be as much the fixes anyway?

Any advice on what to do?

Tbh I'd go for the fixed and not press the button on it until the last minute because IF rates do change and reduce you can always apply for a lower rate before your current mortgage is up.

Where I work lots of clients are doing this now.

Sorry can’t be of much help but watching as we’re in the same position!

Surely they expect the base rate to increase shortly, otherwise why would they offer the tracker one? I don’t think there would be an ERC with our tracker option - so could always take this and switch if/when the base rate increases. I guess it depends how much you want to risk it.

We’re looking at about £350+ per month for any fixed deal at the moment or stay pretty much exactly the same on a tracker.

What’s the early repayment charge on the 5 year?

The erc on the fix is 3.5%

I think we'll be in a similar position as our fix ends in April although haven't started process of consulting with broker yet. We're debating the idea of going on a tracker as childcare bills will be reducing at similar time to expecting rates to go up. That's a big difference in monthly cost isn't it? Wonder what interest that would save making overpayments of that difference? Very hard to know what to do.

If you're considering the tracker, ask the broker to tell you exactly what your payment would be as the base rate rises. Look at the top end, could you afford this?

Personally, if I could afford the fixed rate, I would go with the fixed rate. Worst case you'll kick yourself if rates come down, best case you've bagged an affordable mortgage for another 5 years.

I think it depends so much on your personal circumstances and risk appetite. We have a number of other fixed costs and prefer the certainty of being able to budget so a fix works better for us.

Or we could do a 2 year fix at 5.79%?

These are the questions no one else can really answer- personally i would happily pay more for peace of mind, but it doesn't always make the most financial sense. How much of a stretch are your payments, whats your appetite for risk, what if anything is likely to change in your life in the next few years job/children etc?

@Brunonono you can apply for a new product 6 months in advance, might work well for you to do so now, as rates are predicted to raise again significantly in the coming months. If rates improve in those 6 months you can always change again

I think they are now saying interest rates may not rise as much as they were expecting. Though they may well change their minds again next week. And the week after…

I’d do the two year fix….. Over pay as much as you can between now and next April.

Thank you all. Spoke to my broker and he advised putting in 2 applications for the 5 year fix and 2 year tracker.

Then in a April see where rates are at and he can always switch us to a 2 year fix if rates look like they heading down

our 1.29% fixed rate ends in March. A tracker as it stands isn’t much more than our current mortgage payment but I don’t know what the interest rate will be come then. So I have agreed a fixed 2 year rate at 5.89% which is an extra £300 per month. I am spitting feathers about it but I think on a variable it’s going to go up for a while until inflation can get under control. I can also cancel my fixed rate deal a month before it starts if I change my mind

the base rates are likely to go up by 2 percentage points by the end of the year - so 4.5%.

so I think the 5 year fix for that peace of mind is looking like a safe bet tbh