Fixed, Traker or Discounted ??

[gibo993]

I know I should go to a independant financial advisor, but they all try and sell the mortgage that gives them the biggest back hander.

I'm sticking with my current Mortgage lender but I have reached the end of my dicounted rate and they offered me three alternatives,

1. Discounted for 2 years 1.65% below there standard rate (approx 6.12%)

2.Fixed at 5 ish

3.Tracker .65 above standard base rates (whats a tracker ?)

I don't know what to go for, I thought the reduced rate would be best it will take a few hikes to get past 1.6% but it could take a big leap, expecially as they have held the rates today.

Some of you good Phers must have sound financial knowledge.

Grant

Advice taken as that advice, I wont sue honest

[gibo993]

I'd say tracker, oops its my own thread, come on some one must have a clue, just put Tracker, fixed or Discount

>> Edited by gibo993 on Thursday 8th April 13:56

[psimpson7]

I would go fixed. At least then you will know exactly what you are paying. But then I am a numpty when it comes to money!

[wiggy001]

Have been told several times that a fixed rate will be fixed somewhere close to what the variable rate will hit during the fixed period ie if it's fixed at 5% for 2 years, the SVR will probably hit 5% at some stage in the next 2 years.

I'd therefore opt for a discounted rate or (if available) a capped rate.

All IMHO

[gibo993]

Thats the logic I used, can anyone explain what a Tracker is and why you would go for that.

[simpo two]

gibo993 said:

Thats the logic I used, can anyone explain what a Tracker is and why you would go for that.

I think Tracker just follows the bank base rate, but at the premium you mentioned above.
I'm not an analyst but recieved wisdom seems to be that interest rates will slowly increase.

[MajorClanger]

simpo two said:

gibo993 said: Thats the logic I used, can anyone explain what a Tracker is and why you would go for that. I think Tracker just follows the bank base rate, but at the premium you mentioned above. I'm not an analyst but recieved wisdom seems to be that interest rates will slowly increase.

Yep, normally quoted as Bank of England Base rate + X% (X is normally somwhere between 0.04% and 1% depending on period you chooses before the rate reverts back to standard).

Just been doing the remortgage search for myself. Fixed rates are generally for those who want to be able to budget their expenses for the forseeable future. I work on the basis that banks generally have a better idea about future interest rates than I do, so any fixed rate is going to make them money rather than save me money.

Little difference between tracker and discount. Difference is that a discount policy is based on the lender's variable base rate which can change at a different rate to any changes in the base rate. On the whole, lenders generally follow BoE base rate changes.

So, it comes down to how much it will cost you to change your lender, how long you want any deal to last and past performance of lender. Also need to consider whether you would like to be able to pay off part of the mortgage during the period i.e. make overpayments, and whether you want access to those overpayments sometime in the future. Future tie-ins and penalty clauses.

Have a look at Lambeth Building Society and Cheshire Building Society.

Presume you've tried using Mortgage Comparison sites: e.g. Money Super Market

MC

[gibo993]

Cheers that answers all my qestions, So I will go discounted as its about £100 a month cheaper and it will probably take a couple of years to go up that much.


Its a good flexable mortgage and its with my current lender so no hassle.

[thepeoplespal]

If you are prepared to chop and change regularly go for either the fixed or the discounted, taking into account the costs if you have to move before the tie-in period is up.

If on the other hand you don't want to review your mortgage regularly go for the tracker as you will normally have a reasonably competitive deal without any tie-ins, meaning you can either move the mortgage when you move house or pay it all back without any penalties.

I've a flexible bank account, base + 0.75% tracker mortgage, which works out okay when your pay fluctuates month to month, as it allows full access to any overpayments.