Fix or tracker mortgage?

ChrisD.

ChrisD.

ChrisD.

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The mortgage is due for a renewal, we are below 60% LTV and are looking to move in the next 6 to 18 months or so, depending on what happens to house prices with Brexit, Covid etc. I like the idea of going to a tracker rate as interest rates are very competitive at the moment and of course it carries no ERC. Plus we wouldn't be limited by porting if/when we move. We will have a hefty amount of savings left over and will be overpaying and that amount may likely breach 10% of the total loan value.

With that said we are well aware that going with a tracker carries the risk that if interest rates do rocket then we'd end up paying a potential significant amount of interest.

Total mortgage is going to be around £150k but we'd have about £40k left in savings between us if we went for that figure.
 
I thought tracker mortgages still carry ERCs? Might be significantly less than fixed, but i'm not sure you'd get away scott free.

I guess the tricky part is your short term intention to move. Interest rates are nice and low at the moment, and i'm not sure i see them increasing quickly in the short term, which makes tracker seem the obvious choice.

I think you probably need to draw up some scenarios and work out the costs involved:
- Tracker mortgage, ERC for moving in 12-18 months
- Tracker mortgage, no ERC for finishing duration of mortgage (i.e. 2 years)
- Fixed mortgage, ERC for moving in 12-18 months
- Fixed mortgage, no ERC for finishing duration of mortgage (i.e. 2 years)

Presumably as you're only "looking to move" rather than have a requirement to move, it wouldn't make a huge deal if you had to delay a purchase until closer to 24 months? (I may be wrong, but i thought most lenders give some leeway as in 2-3 months, where you wouldn't incur a fee).
 
If you are looking to move soon you need one with no ERC, which from my understanding are not that common or basically non existent, although most products can be ported to the new property, definitely check that.

It's this kind of thing it's worth getting some proper financial advise though.
 
Semple said:
I may be wrong, but i thought most lenders give some leeway as in 2-3 months, where you wouldn't incur a fee
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Bank of Ireland UK certainly don't, they wouldn't even budge by a single day. They've never getting my business now and I think for future mortgages I'm going to stick with the big names as they seem to be far more lenient.

The tracker I've spotted is the HSBC one, it has no ERC penalties. I think if we did move then any interest rate rises wouldn't be anywhere near an ERC penalty.
 
I'd go for whatever is cheapest at the moment. Interest rates are very unlikely to go up any time soon, so no real value in fixing for longer if you get a worse rate. And a tracker is only better if you're paying less interest than a fix (notwithstanding differences in arrangement fees).

We were able to port our HSBC mortgage over to our new house, when we moved about 9 years ago, as long as we bought the new property within 6 months (we had a gap of 4 months where we moved in with my parents). Although that was a lifetime tracker (BOE Base +0.89% - we still have that one), so might be different on their fixed mortgages.
 
I always thought trackers had no ERC's too, but from a quick google it suggests not all of them do.

I suppose the question is how flexible do you want to be? You say 6-18 months, i assume that's when you start looking rather than expect to actually move as it could take up to 6 months anyway at the moment.


With a lowish mortgage, i suppose the difference between a tracker rate and the SVR is probably minimal? Especially if you used your savings to pay off the balance and then released it again when you moved. That'd at least give you the flexibility if your provider doesn't do a tracker with no ERC.



Or assuming your new house won't be weird, i'd just fix for however long you want and port the mortgage over to the new property (by weird i mean timber construction etc where you might need a specialist mortgage and the existing one may not cover the property)
 
cheesyboy said:
I'd go for whatever is cheapest at the moment. Interest rates are very unlikely to go up any time soon, so no real value in fixing for longer if you get a worse rate. And a tracker is only better if you're paying less interest than a fix (notwithstanding differences in arrangement fees).
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Tracker is 0.1% more expensive than a fix, which makes very little difference to the monthly payments.
 
Martynt74 said:
I suppose the question is how flexible do you want to be? You say 6-18 months, i assume that's when you start looking rather than expect to actually move as it could take up to 6 months anyway at the moment.


With a lowish mortgage, i suppose the difference between a tracker rate and the SVR is probably minimal? Especially if you used your savings to pay off the balance and then released it again when you moved. That'd at least give you the flexibility if your provider doesn't do a tracker with no ERC
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The plan is now to wait for the market and its inflated prices to settle, solicitor workloads to return to normal and then reevaluate. I guess we may start to look around in the summer again but if we do end up tiling the kitchen, new overhead shower in the en suite etc we'd want out moneys worth out of it. I think 12 months minimum is probably more realistic.

We don't want to put too much of our savings into the mortgage, just enough to bring it down so the interest isn't horrendous. We're keen on keeping savings in the bank to use as and when and then top them up after. It's much more difficult to get money out of a mortgage once it's in there.
 
When I moved a few years ago there was no ERC in my fixed mortgage as long as I just moved it over to the new place and continued as before. It might have helped that I used the same bank for an additional mortgage for the extra lending needed.
 
billysielu said:
just done it myself, similar circumstances
2 year tracker - good rate and no erc.
/thread
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Came here to say this.

Note that a broker told me they wouldn't be allowed to do this for me as it would be a mark against them for "short term lending". I just went direct to nationwide and no issues.

At 60% I paid no fee and got 1.39% Apr (base rate + 1.29)
 
Buffman said:
Came here to say this.

Note that a broker told me they wouldn't be allowed to do this for me as it would be a mark against them for "short term lending". I just went direct to nationwide and no issues.

At 60% I paid no fee and got 1.39% Apr (base rate + 1.29)
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2 year tracker with Nationwide is currently 1.39%, the same as HSBC. I'm reluctant to approach Nationwide as they declined my mortgage application (2 and 4 years ago), although at the time I was self employed and now I'm full time, not sure if that would have a bearing now. I already have full approval with HSBC for a house move and although I know I'd have to apply again, I can't see them saying no as they'd now be lending £200k less.
 
ChrisD. said:
2 year tracker with Nationwide is currently 1.39%, the same as HSBC. I'm reluctant to approach Nationwide as they declined my mortgage application (2 and 4 years ago), although at the time I was self employed and now I'm full time, not sure if that would have a bearing now. I already have full approval with HSBC for a house move and although I know I'd have to apply again, I can't see them saying no as they'd now be lending £200k less.
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Yeah would probably be self employment. I'd just go for whichever is easier if the rates are the same then.
 
Buffman said:
Yeah would probably be self employment. I'd just go for whichever is easier if the rates are the same then.
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It really annoyed me as they gave me an AIP and then once the full application was declined, they flat out refused to provide any pointers as to why. It's left me in a position where I'd rather not give them my money now - but I know all banks are as bad as each other.
 
ChrisD. said:
@Buffman how long did your Nationwide application take out of interest?
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It was around August and think it took about 3 weeks (you can set the date you want it to transfer over from your current fixed term mortgage
)

Conversely my HSBC mortgage on my new purchase took 1 week once I gave my broker the documents (not yet moved)
 
IFA were taking an age so I went direct to Nationwide. The valuation was done on Monday and the offer came in this morning. They valued it a little lower than my estimate however still in that under 60% LTV bracket for the better rates.

2 Year Tracker
1.39% (Base Rate + 1.29%)
 
I went 5 year fixed and would do so again (2.08% on a 5 year fix with 25% deposit).

Have you seen what's happening in the bond markets?

10 year Gilt yield:

https://stockcharts.com/h-sc/ui?s=$UKT10Y&p=W&yr=5&mn=0&dy=0&id=p65427288375

My personal plan is to pay as little as possible (i.e. just the interest and captial) whilst interest rates are low.

The excess (i.e. savings) are going into various investments.

If they go sky-high (e.g. 5%+), then I'll start overpaying and save less.

When I remortgage, again it will depend on interest rates. If they are still low in a couple of years, I''ll probably just remortgage at 25% to release some equity and invest that too.
 
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