Fixed, Tracker or stay on Lender's Variable Rate

Posted on 16 February 2011 by stephen oman


We are coming to the end of a 4.99% fixed 2 year deal with Nationwide (end of March) having been caught out by having a fixed deal just as all the rates dropped. I would like to know if fixed is the way to go (long or short term?) or would a tracker be better. Should I leave it on the bmr or look for another deal?

Stephen,

At the end of March you will be fortunate enough to revert to Nationwide's Base mortgage Rate for the rest of the mortgage term. This rate can not exceed Bank of England Base rate by more than 2% and currently stands at 2.5%. Depending on the size of your mortgage in relation to the property value it is quite possible you will find that there are no Tracker mortgages that better this, the best Term Tracker at 60% LTV is currently BR +1.85% and at 75% it is BR +2.30%.

Fixed rates have come down since March 2009 but unless you need the certainty of knowing what your monthly payments are going to be we are not currently recommending them. If you do need a Fixed rate we don't think the 2 year deals offer good value as we believe that the Base Rate will not rise that quickly and you would lose the benefit of your current reversion rate.

I recommend that you speak to a local independent mortgage broker about your situation.

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.

You are currently offline. Some pages or content may fail to load.