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Tracker or Fixed mortgage


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Our fixed rate ends in 3 months so I'm getting options from my mortgage broker to look through.

A fixed rate would be nice but it has a 3% early repayment charge. A tracker at the moment would be the same monthly repayment as the fixed rate but the base rate is looking to increase again by the end of this year and again by the end of 2023 to a predicted 2%.

So that means my repayments could increase by up to £100 a month by the end of 2023. As we're looking to move soon, some time next year I'd imagine, a tracker is still cheaper than paying the early repayment charge! But that's assuming I can find a job and we do move.

With everything else rising I'm not 100% comfortable with going on a tracker mortgage though but then I don't want to pay an ERC. So I need to have a think!

My mortgage guy has also recommended I go for a no product fee mortgage with a higher rate, so £30-£40 a month more compared to adding a fee to the loan or paying it off beforehand.

Has anyone else been in a similar situation when they were thinking of moving soon, was a tracker mortgage worth it for you?

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If we weren't planning on moving then I would fix it but if I do that and move next year (we are selling and renting to start with) I'll have to pay thousands in early repayment charges. So although a tracker will have higher repayments, in the long term it should save me quite a bit.

The only other option is to sell and buy while trying to find and start a new job, which is going to be a pain. But then I could fix it and port the mortgage over assuming I don't need to change the amount.

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But then what if we sell, rent somewhere first and mortgages start increasing alot making it more difficult to get one. Although with rates rising could we see a housing crash instead and prices start dropping. If only we could predict the future!

I really think selling/buying and starting a new job will be too much hassle in one go.

I guess we could also stay put for another 2 years and then move when things have hopefully settled down.

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The way house prices are going I'd say you'd be wrong to get off the ladder and rent. House prices will disappear off into the distance while you're paying someone elses mortgage. In a year you might find that it's cost you £10k in rent and related costs, and houses are then £20k more than they were.

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21 hours ago, Viking said:

The way house prices are going I'd say you'd be wrong to get off the ladder and rent. House prices will disappear off into the distance while you're paying someone elses mortgage. In a year you might find that it's cost you £10k in rent and related costs, and houses are then £20k more than they were.

Yes that is a concern too and I'm not actually keen on renting TBH. But I think trying to juggle a move and start a new job is going to be too much. If I secure a job but can't sell or find anywhere to buy shortly afterwards I'd have to rent some where short term so I can stay during the week. There's no way I could commute it!

People I know who have done this either rented anyway, work remotely, commuted back or were retiring so didn't need to find a job!

15 hours ago, Geoffers said:

You probably are already but look for jobs where you want to locate to. When you have an offer, it may help force your hand and things could move very quickly.

We're looking to move close to Norwich, unless something really nice further away comes up. So I've been looking for jobs around there. My plan was to get a job, rent nearby and if it works out buy somewhere in that area if we liked it. At least with renting first, if we didn't like the area we wouldn't be tied to it.

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I think starting a new job in a new area will force our hand anyway as it would depend when the job starts. Plus trying to buy somewhere means we're limited to what is available at that time. At least with selling first and having a good deposit in the bank means we can spend a little time finding something that we like.

I've asked my mortgage guy what fixed rates he can get but I think we'll be doing that for the time being and see how things pan out. Trackers seem to be lower than fixed rates ATM but if the base rate rises by 1% or more in the next year they will be alot higher. I'm sure some lenders reduce the ERC when you get close to the end of the fixed term so we might not have to put the move off for that long.

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Going through this dilemma at the moment, and it's a tough one given the current interest rate environment! The fact that 5 year and 10 year fixed rates are the same does suggest that banks are not expecting interest rates to continue to increase in the long term, and that makes it even more confusing.

Best option is to consider whether you could still afford the mortgage if the rates rose and if you're happy with the risk, if you're not then stick to a fixed rate as I can't see rates coming down again in the short term.

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Base rate has increased to 1% now so that's made my mind up to fix again. But you do make a good point about 5 and 10 year fixes being the same rate.

With everything else going up and factoring in an October energy rise we'd be struggling if we took a tracker deal. If we definitely knew we'd be moving within 6 month I'd do it but I really can't be sure.

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Definitely, especially as they were predicting the base rate to increase by the end of the year and it's already gone up!

Still waiting for my mortgage guy to get back to me but we're currently with Santander and they've offered a tracker for 1.94%. That's the base rate plus 1.19% but they haven't added the latest increase on yet!

There are two fixed offers for 2 and 5 years with a £999 product fee at 2.59%, then 2, 3, 5 and 7 year fixes without a fee but 2.79%. Adding the fee to the mortgage increases the repayments by £5, taking the no fee rate adds another £6 on top of that. So if I stuck with them the best thing to do is pay the fee upfront.

Doing a quick search online I can see they aren't the best rates available ATM as sticking with Santander would add at least £40 a month to our current repayments. Hopefully we can find something close to our current rate but we need to hurry up!

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Generally unless your mortgage amount is really small, paying the fee upfront is always cheaper than the higher rate no fee option (as you've found!)

Also factor in the legal fees/valuation fees/other costs if you were to remortgage to another lender so sometimes it's easier and cheaper to just switch deal with the same lender. We're looking at similar rates so that's consistent - I think the lowest option for us was around 2.2% I think but lending criteria didn't suit us!

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18 hours ago, Viking said:

Things must've changed since I remortgaged earlier this year. I got a 5 year fixed deal, no fees, free survey at 1.67%... 😬

Wow - what a difference a few months make......

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I thought it was strange you could add the fee to the mortgage and the repayments were cheaper than the no fee option.

My brother fixed at 0.99% in December for 2 years. He could've done 5 years for 1.5% and is kicking himself now that he didn't for that.

The best tracker deal I was offered included free everything and no fees for 2.69%. But given how the base rate is rising I'm not taking that.

Need to chase my mortgage guy up but if I have to the Santander deal isn't that bad when you consider there's no credit checks and other fees to pay.

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Chiming in late here... If you can afford the product fee, pay it upfront and don't 'pay for it' by accepting a higher interest rate. 

One thing I would encourage is to go and search how to calculate compound interest. Then use excel to provide you a burn down of your mortgage. 

 

You will be surprised at how much overpaying or taking on a shorter mortgage term will help you pay off your mortgage that much earlier!

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  • 4 weeks later...

Still waiting for my mortgage broker to reply, he's taking a while!

I read that you can't get a fixed rate under 2% any more and Santander are offering me 2.49% with a £999 fee.

Trying to look online and the cheapest fix seems to be around 2.25%. I suppose it could be less via a broker. But the difference between those is under £20 a month. Now my broker charges £300 so by the time I factor that in I'm not actually saving much. So I'm thinking I might just take the current deal.

Another option is to try a fee free broker who obviously make commission on selling mortgages from the lenders. But I'd need to find one with a good reputation and go through the whole process again of applying.

I have 50 days left before my fixed rate ends so need to decide!

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  • 1 month later...

For anyone interested I took a new deal staying with Santander on a 2 year tracker for 1.19% plus the base rate. That started yesterday but with today's base rate increase the repayments will go up £20 for next month.

We have definitely decided to move asap now, I have started looking for work already but it may take a while to find something I like. We have gone with an interest only mortgage to free up some money for all the other bills rising. I can make payments towards the capital whenever I want and the important thing is no ERC so that would save a few thousand!

We'll pay the mortgage off when we sell up and move. Then if we need another mortgage to buy something else we can apply again but I'm hoping we'd only need a small one. I think renting short term and then buying will be a lot easier than juggling a job move with having to try and buy something immediately that we might not even like. At least by renting first we can take our time (although not too long!) to find something we both agree on.

I can also change my deal back to a fixed repayment rate at any time in case we change our minds but that's unlikely!

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5 hours ago, Geoffers said:

Great stuff. Doing the right thing there. Too easy to make the wrong decision on housing, looking through rose tinted glasses because it's a life change. 

I just hope I can find a job asap now, although I may put off applying until the New Year unless something I really fancy comes up.

Guess I just need to tell work now or at least my manager what my plans are. As I want to continue working in a school they get references before interviews and I'll need a whole day off for those with travelling.

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12 hours ago, adam_r said:

I would not, as soon as they know you want to leave they will start looking for a replacement. It will also complicate matters in work. 

Best use holiday / sick day to attend interviews 

It's a bit different in a school though to a normal workplace within a company. It's always sad to lose someone who's good at their job but they always support those who want to leave. They even give you the time off for interviews and pay for the day too, no need to pull a sickie.  But as I said the first interview I get they will find out as they always get references first.

We've had lots of people leave since I started working there, some have been there 20 years too. Our deputy head who has been there 14 years left before the summer to a school a couple of miles down the road. They knew for months beforehand that she wanted to leave. Reason was she wanted less responsibility and there were no lesser positions available at our school.

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