Mortgages: Average Tracker Rate History?
Discussion
I’m trying to find out the percentage above base that typical tracker rate mortgages track at with respect to changing base rates. Currently 1.5 to 2% seems normal – does anyone remember what they tracked at when the base rate was higher? I’ve looked on the web and I can’t seem to find a history of average tracker rates, which is what I really want to see, to understand how it changes with base (and swap rates of course, but let’s not complicate things!). Having bought my first house in 2009, I’ve only ever known about mortgages in these times of very low rates, so I’ve not got a clue how the market changes when the rates change, other than the obvious fact that the gap between base and lending rates is generally a bit bigger when the base rate is very low as it is now, but how much by? Any pre-2009 info will be news to me, as back then of course I only knew about savings rates...
The reason for me wanting to know is that my wife and I are moving to a bigger house soon and the best 2 year fixed rates for our expected LTV are now around 1.8% to 1.9%, whereas the best tracker rate I’ve found is a lifetime tracker from my current provider HSBC at 1.99% (tracking at base + 1.49%), with a higher arrangement fee than those fixed rates. Obviously, the cheapest mortgage over just 2 years is one of the fixed deals, because they’re cheaper in repayments and in fees too (I've worked out the sum of the two divided by 24, obviously), but in mid 2016 when those deals finish, I’m sure a rate rise will be on the cards and the rates we'll want to move to won’t be anywhere near as good, plus we'll have another arrangement fee to get the best deal. Whereas, if we go for the lifetime tracker now and accept the arrangement fee and slightly higher monthly payments, there’s no extra fees to pay in 2016 and we just continue at base+1.49%. If the 1.49% margin is a good one, then the tracker is probably the better deal (although obviously I'd do the maths on that). However, if tracker rates in a few years time fall with respect to base, then we’d be better off fixing now, taking the savings over the two years and then adopting a tracker later on when they're a better deal. I don't want to make this post too long, but obviously I'm doing the maths for 5 year fixed deals as well and also, to avoid the inevitable posts on the subject, I'm not really interested in the pros and cons of fixed vs tracker as I'm aware of those already and are taking them all into account with my sums.
So my question is: does anyone know what sort of tracker rates were common in the past when base was 1, 2, 3, 4% etc? Is base+1.49% a good deal thinking long term, and by how much?
Many thanks in advance.
The reason for me wanting to know is that my wife and I are moving to a bigger house soon and the best 2 year fixed rates for our expected LTV are now around 1.8% to 1.9%, whereas the best tracker rate I’ve found is a lifetime tracker from my current provider HSBC at 1.99% (tracking at base + 1.49%), with a higher arrangement fee than those fixed rates. Obviously, the cheapest mortgage over just 2 years is one of the fixed deals, because they’re cheaper in repayments and in fees too (I've worked out the sum of the two divided by 24, obviously), but in mid 2016 when those deals finish, I’m sure a rate rise will be on the cards and the rates we'll want to move to won’t be anywhere near as good, plus we'll have another arrangement fee to get the best deal. Whereas, if we go for the lifetime tracker now and accept the arrangement fee and slightly higher monthly payments, there’s no extra fees to pay in 2016 and we just continue at base+1.49%. If the 1.49% margin is a good one, then the tracker is probably the better deal (although obviously I'd do the maths on that). However, if tracker rates in a few years time fall with respect to base, then we’d be better off fixing now, taking the savings over the two years and then adopting a tracker later on when they're a better deal. I don't want to make this post too long, but obviously I'm doing the maths for 5 year fixed deals as well and also, to avoid the inevitable posts on the subject, I'm not really interested in the pros and cons of fixed vs tracker as I'm aware of those already and are taking them all into account with my sums.
So my question is: does anyone know what sort of tracker rates were common in the past when base was 1, 2, 3, 4% etc? Is base+1.49% a good deal thinking long term, and by how much?
Many thanks in advance.
The answer to your question is almost unanswerable in my opinion. Product available 5 years ago will give you no indication as to what products will be available in five years time.
In 2006/7, when the base rate was circa 5-6%, I did lots of tracker deals that were actually base MINUS a % rather than the current rates of base PLUS a %, but that was due to the market conditions at the time.
The rates available then were blinkered as they never saw the credit crunch on the horizon. I would be very suprised if when the base rate returns to 5-6%, that there would be tracker products available at base minus a % again. I would expect all tracker products at that time to even have a floor rate in case the base rate dropped significantly again.
In 2006/7, when the base rate was circa 5-6%, I did lots of tracker deals that were actually base MINUS a % rather than the current rates of base PLUS a %, but that was due to the market conditions at the time.
The rates available then were blinkered as they never saw the credit crunch on the horizon. I would be very suprised if when the base rate returns to 5-6%, that there would be tracker products available at base minus a % again. I would expect all tracker products at that time to even have a floor rate in case the base rate dropped significantly again.
Rob, you're no longer tied-in to any tracker deal, hence the up-front fee. So if trackers improve in the future, you can always jump-ship. I'd be tempted to price it vs a 3-5 year fix, or a 2-year fix followed by another 2-year fix say 1% or 1.5% higher.
But to answer your question, back in '03-07 they got REALLY low - 0.25% above base, less I'm told (but didn't see). That said, I can't see them getting that low again for a long time (won't say never).
But to answer your question, back in '03-07 they got REALLY low - 0.25% above base, less I'm told (but didn't see). That said, I can't see them getting that low again for a long time (won't say never).
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