Tracker or fixed rate. Am at wits end as to know which one to take?

[jogym]

My mortgage balance is £40,000. On fixed rate ending soon. Offered 6.64 fixed for 2 years. Seems pretty high rate but only £399 arrangement fee. Would tracker mortgage of 5.59 for 2 years suit better. I don't know what would be best to do??

Does the tracker have an arrangement fee? If not, I would take that.

Our mortgage deal ends at the end of this year and looking a the deals, it appears that the fixed deals are more expensive ...

I suppose the thing to consider is what you think the bank interest rate is going to be for the period of the loan... (assuming from your example that the rate is +.59% the base rate??)

Is Northern but not sure if it is Northern Bank Base Rate or Bank of England? Is there a difference.

Yes, there is a difference - they can do whatever they like with their base rate whereas they have no control over BOE rate. It should say in your offer.

I think the most important thing is not whether you think the rate will go up but whether you could afford it if it did.

If you wouldnt be able to afford it if it did rise then its a gamble you may or may not wish to take.

The fixed rate may look more expensive but with it comes the knowledge that your payments will remain the same. Although if rates were to fall you would find yourself tied to paying that amount when you could pay less.

Hi I am a mortgage adviser the best thing to look at is the 'truecost option'...for example if a rate of 5% will cost you £500 per month but will attract a £1200 fee over 2 years in real terms the truecost of that is £550 per month (£500 monthly payment and the £50 comes from £1200/24 months - £50 per month). If this is compared to a 6% deal that will only cost you £525 per month with no fee then this is a cheaper truecost deal even though at first glance it isnt. Other things to consider are valuation fees and legal fees.

Not knowing your full circumstances I cant say for certain but the fixed rates you are stating seem pretty high so beware.

Also with a tracker rate..always if possible go for one that tracks base rate above one that tracks the the banks standard variable rate as they can put this up anytime they like without warning.

If you need any help email me on [email protected] my advice is free of charge.

Hope this helps

Ceri

Hi just to let you know our problem was sorted out. We held off sending in the forms for the fixed rate til the very last minute and behold we received a letter from the bank saying that we will be going on the base rate tracker 5.75% for the remainder when our deal ended. No fees, no tie-ins and if it starts to go up we can then go on a fixed rate if we choose. This was the terms of our fixed rate deal taken out 3 years ago but WHY didn't they tell us this when we enquired about a new deal??????

That is so naughty and typical of banks...they didnt tell you because someone behind the desk would get commisson by signing you onto a new deal. If you variable rate is only 5.75% in this current market you are definitely worth staying put.

This happens all the time so always check when your deal ends...basically the regulations state you have to offer clients a 'suitable product' which on paper means it is fine to offer you a fixed rate deal with a fee as they can justify it by saying you wanted a fixed rate but morally it is just wrong.

You are always better going to an independent mortgage adviser, basically although they are bound by the same regulations the truthful aspect is more likely to kick in with them as if you are a small independent adviser you have to be honest & trustworthy with your clients in order to get future recommendations.

Glad you picked up on this in time

xxx

There are 2 year fixed rate on the market at the momment which are close to the deal you have.