Do I take a Fixed or Tracker Rate Mortgage?

Posted on 22 August 2012 by Rich

Hi, We're currently coming to the end of our 2 year fixed rate (2.89%) with YBS. We're interested in a five year fixed (4.39%) with YBS on a £200k mortgage (23yrs to go) for the peace of mind and the fact that we have a 1 year old daughter and another on the way. Question is whether to go for the relatively expensive 5yr fixed or change lender for a better 5 yr fixed rate (we only have 75%LTV, so many of the attractive offers out there, like HSBC @2.99% are not feasible), or gamble on a base rate tracker. Can you help?


Whether to take a fixed rate now and enjoy the security of knowing what your interest rate will be for the next 5 years or to take a Bank Base rate tracker and enjoy the low interest rates currently available?  If only we had a crystal ball and knew just how long Bank Base rate is going to stay at it's current historic low.

What is best for you depends entirely on your attitude to risk.  If you like to gamble and acknowledge that whilst everyone expects Base rate to remain low for the next 2 -3 years no one actually knows what will happen and there is a chance that rates will start to increase then a tracker is for you.  You won't will be able to reduce your current monthly payments because the 2.89% rate with Yorkshire is less than the cheapest 2 year Tracker rates available to you,  but you could get close with a rate of 2.99%.  Watch out though for the revert to rates on these shorter term products, the 2.99% mentioned above reverts to 5.99% after 2 years and with Santander just announcing an increase in their SVR who knows what the product will revert to in 2 years time?  I would suggest that you look at 5 year or Trackers for the term of the mortgage if you want to look at a variable rate, but these start out at around 3.79% and may or may not go up.

Fixed rate mortgages, ideal if you don't like to gamble and want to know exactly where you will be over the product term.  The starting rates are now similar to Trackers and with a 75% loan to value you would be looking at around 3.79%.  If you want a longer term there are 7 year Fixed or 10 year Fixed rates starting at around 4.29% & 4.59% respectively.

All in all I believe we can help you and that we can find you a better offer than Yorkshire are currently offering you.  Please call 0344 346 3672 to talk to one of our independent mortgage advisers and tell them the date and title of your question, they will then be able to help you find the right mortgage for your situation.


Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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