Fixed or Tracker

Posted on 11 April 2011 by chris

My fix with Nationwide at 4.79% comes to an end soon and I managed to secure a new 5 yr fix with HSBC @ 3.99% with free valuation and legal package and only a £99 booking fee. My question is this, I will go onto Nationwides BMR @ 2.5% if I dont take up the HSBC mortgage, but there are so many different opinions on what will happen to the mortgage rate I am pulling my hair out trying to decide whether to lose my £99 fee and stay on the NW BMR or take up the HSBC offer in June which will guarantee my payments for another 5 years and also let me reduce the term to 17 years instead of 20. Help !! All opinions gratefully received.


Only last week our view of the market was that there would probably be a rate rise next month and then none for the rest of the year.  However, the recent drop in inflation is causing everyone to reconsider whether rates will rise that soon.  What we do know is that lenders have already factored in expected rate rises and now the cheapest 5 year Fixed rate is around 4.20% and HSBC's is 4.59%.

The decision you need to make is whether to stay on a variable rate, which is currently 1.49% lower than the fixed rate you have reserved with HSBC and run the risk of rates rising up and beyond 3.99% in the next 5 years or opting for the security of a fixed rate that you know you can afford but which may turn out more expensive over the 5 years than the variable rate.  Realistically there is only one way for interest rates to go and it just a question of when and how quickly, unfortunately nobody knows the answer to this. 

If you have any doubt about being able to afford increased mortgage payments you should opt for the fixed rate.  You should also consider how much interest you will save by reducing your mortgage term by 3 years, on it's own this may more than make up for the possibility of higher mortgage payments.


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.

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