Fixed or Tracker?

Posted on 8 April 2011 by andrew turner


My 5 year fixed rate ends May1 @ 5.09% and will drop to 4.79%.  Outstanding £100,000 on a value of £150,000.  I been offered a 2 year fix of 3.40% or a 2 year tracker @ 2.25%, which is better or is there a better option?

Andrew,

Both these rates are competitive in their respective markets and whether or not a better deal can be found will depend on the fees you are being charged.  If you move to another Lender it is possible you will either have to take a higher rate for a free valuation and free legal package or a similar rate and have to pay for the valuation, legal costs in addition to any product fee.

Whether or not you take a fixed or tracker rate depends on your attitude to risk and what you think interest rates will do over the next two years.  Rates will have to go up by 1.15% before you start paying the same rate on the tracker as the fixed.  Our current belief is that rates are likely to be increased next month and then stay stable for the rest of the year.  This may all change depending on the next round of financial results and consumer data and so the question you have to ask yourself is do I want or need the security of knowing what I will be paying for the next 2 years or am I comfortable with the risk that I might end up paying more than 3.40% if I take the tracker?

I believe you would benefit from speaking to one of our independent mortgage advisers. Please call on 0344 346 3672 and tell the consultant the date and title of your question. They will be able to look at your situation and advise you accordingly.

Peter

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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