Don't know, tracker or fixed...

[Jet888]

We're looking into mortgage deals for when ours end in December. We've already been fixed rate but this time our broker said it would be worth considering a tracker potentially.
Reason being best 5 year fixed available was 3.36%. Best tracker was 2 year at 2.45%
He was postulating that, even with rises to the base rate, the tracker was unlikely to get higher than 3.36% in 2 years and in 2 years the fixed rates could have dropped a bit as potential recession etc so we might get a better fixed rate deal then rather than being tied into 3.36%.
I'm torn. I've always been risk averse but then I've never faced a £200 per month versus £100 per month increase in my mortgage before, which is what these two different rates would equate to in monetary terms.
I know I don't have to take any deal I sign up with now and can change before December but just asking from advice from people who might be better informed/more experienced than me!

He might be right but we live in strange times and I'd go for certainty right now.

Im no expert but ..... are there fees for either of these products? , depending on that id be tempted to go for the tracker and switch if rates keep going up, although accept that the fixed rates will also go up.

If it will cost to switch products then couĺd you not find a shorter fixed rate? , we always fix and are locked into a 5yr deal but i like the security.

We were chatting to our broker today. He also offered both options but said it's a uncertain time so he couldn't make any solid predictions re:tracker. He suggested both were fair options. We will likely go with fixed for the certainty.

I always prefer fixed - you know where you stand then. My son got a fixed mortgage at the beginning of the year. Interest rates have already risen several times. He’s saved himself £50+ a month by fixing.

I've gone fixed. Don't want any nasty surprises.

@Ilikewinter the 2 year fixed rate was alot higher then the 5 year. Hmm, tricky. I would usually always go for fixed but just not sure what will be happening in 2 years time!

Ah its so difficult to decide itsnt it! I cant see interest rates coming down anytime soon but looking at 5 years who knows .... and I guess thats the problem!

I think id still fix

I have just fixed for 5 years even though it is costing a £1500 'arrangement' fee. I am a single parent and my mortgage is only going up by £40, i just cannot risk it going into rise after rise or fixing for 2 years to find them much higher. I now have 5 years without too much worry.

Fixed if you can get a reasonable deal, BOE was reported in the press this morning warning that more aggressive interest rate rises could be needed.

I have always gone for trackers in the past but have now fixed for 5 years. I can see rates going significantly higher for longer to bring down inflation plus you don't have the cost of remortgaging again in 2 years.

Does your broker get the same level of commission on both products?

Likely to move tracker.

staying put id fix personally

rates are only going up for the next period.

Hmm, I thought predictions were for base rate to be at around 2 - 3% next year - which would see your tracker at 3.2% - 4.2%. It might even out, or indeed win out over time - but it also depends on how much value you place on having a known amount committed to.

If you want certainty go for fixed.

I was reading more about the potential/ likely rate rises too and it doesn't seem that long until the tracker rate would meet and then potentially surpass the fixed rate...
God, it's a scary price increase. We can do it but won't be pretty. Urgghhh...

You do pay a premium for certainty. I remember reading a study years ago (but I can’t find it now, sorry) that showed how borrowers who always go for trackers, invariably pay less than those who go with fixed rates, over the lifetime of their mortgage.

But that’s only relevant if you are able to absorb a rate rise (or multiple rate rises). If you are not, then a fixed rate deal is preferable, even if it is likely to cost you slightly more.

We moved from a fixed to a tracker in January, The interest rate for the tracker was 1.89% plus base rate. Our rate has increased to nearly 2.8% (from 1.89%) since then - so 1% in 6 months.

Is that tracker rate including the base rate? I'm not a financial advisor but the base rate is increasing every other month at the moment so if it doesn't include the base rate, you can expect it to increase anyway.

tracker is ok if you have a small mortgage & can withstand rises.

It will depend on timing though. We fixed for 1.14% for 5 years at the end of last year which will beat today's trackers. Rates only need to rise less than 1% for the Ops fixed deal to be cheaper and that is without taking into account the rearrangement fees for the tracker at the 2 year point.

We're thinking fixed is definitely way to go with the new rates being set beginning of August I think it is?

I do also need to speak to my broker though as I found a better 3.09% deal last night that would save us £800 over 5 years so I need to check why he didn't pick that one up...wasn't hard to find!

If the 5 year fix is cheaper than the 2 year fix, does that look better against the tracker? It's a case of how much interest rates will rise, which is obviously an unknown, because I'm not sure rising interest rates will do much to reduce inflation because most of the increased costs are in energy, petrol/diesel and food and they've all gone up massively and, while people can try and reduce what they use/buy, we all need a certain basic essential level, unlike things like eating out, holidays and other optional goods and services where we could completely cut it out if we really had to.

We've never fixed and it's worked out cheaper for all except about 6 months in the last 25 years of having a mortgage and it's only now that I'm possibly regretting not fixing in the last year or so as we're on a BR+0.4% lifetime tracker, but we only owe about £25k now and if rates start to rise much more, we'll just overpay to get it down quickly rather than fix now at 3 or 4%.

Could it be a direct only product?

The reason why we have such a good mortgage deal (lifetime BR+0.4% tracker) was because I ignored the broker's recommendations because they didn't offer what I asked for and what we got was only available direct from the lender.

@BarbaraofSeville that's interesting to hear. The one I found said available to brokers on the search tool so not sure...
My goal one day is to overpay on our mortgage...seems like a pipe dream at the moment though!

We always went with fixed when interest rates were uncertain or going up and tracker when they were heading down. Worked well for us, we ended up with a tracker for years at low interest rates and thankfully managed to pay it off. I think right now I’d fix so I knew exactly what my outgoing would be.