2 year tracker - interest rates
Discussion
jenzo said:
Your thoughts please
Would it make sense for me to go for a 2 year tracker rate (resi) mortgage and re review after 2 years - given the state of the current economy and likelihood interest rates increasing in the next 24/36 months.
The gap between Tracker & Fixed rates isn't big enough to make the risk worthwhile....Would it make sense for me to go for a 2 year tracker rate (resi) mortgage and re review after 2 years - given the state of the current economy and likelihood interest rates increasing in the next 24/36 months.
Sarnie said:
The gap between Tracker & Fixed rates isn't big enough to make the risk worthwhile....
It is big enough on the mortgage I'm going for.1.69% tracker (1.19% above base rate) vs 2.03% fixed for 2 years from Virgin Money.
So that's a breakeven of 0.34% over 2 years. If you're of the opinion that rates won't rise until next year then that's approx 3 rate rises in 2017 before you start being worse off compared to the fixed one.
Shaoxter said:
It is big enough on the mortgage I'm going for.
1.69% tracker (1.19% above base rate) vs 2.03% fixed for 2 years from Virgin Money.
So that's a breakeven of 0.34% over 2 years. If you're of the opinion that rates won't rise until next year then that's approx 3 rate rises in 2017 before you start being worse off compared to the fixed one.
0.34% difference, isn't a big enough gap to warrant the risk, in my opinion.......one half a percent rise and it's wiped out......1.69% tracker (1.19% above base rate) vs 2.03% fixed for 2 years from Virgin Money.
So that's a breakeven of 0.34% over 2 years. If you're of the opinion that rates won't rise until next year then that's approx 3 rate rises in 2017 before you start being worse off compared to the fixed one.
0.34 difference over 2 years?
I'd risk going tracker if i was you. I dont think we hike this year. I also think when we do it will be slow and gentle, if they dont hike this year do i think the year after they hike enough to average over 0.68 higher for that year? No i dont.
However, thats just my view.
I'd risk going tracker if i was you. I dont think we hike this year. I also think when we do it will be slow and gentle, if they dont hike this year do i think the year after they hike enough to average over 0.68 higher for that year? No i dont.
However, thats just my view.
Sarnie said:
0.34% difference, isn't a big enough gap to warrant the risk, in my opinion.......one half a percent rise and it's wiped out......
Depends if/when that 0.5% rise comes, doesn't look likely in the near future.Also paying 1% interest in year 1 then paying 3% interest in year 2 is cheaper than paying 2% interest from years 1-2 (simplifying the maths here).
ChrisNic said:
What does the tracker track, is it the BOE base rate or the Banks base rate
BoE base rate, says so on the website.Shaoxter said:
Sarnie said:
0.34% difference, isn't a big enough gap to warrant the risk, in my opinion.......one half a percent rise and it's wiped out......
Depends if/when that 0.5% rise comes, doesn't look likely in the near future.Also paying 1% interest in year 1 then paying 3% interest in year 2 is cheaper than paying 2% interest from years 1-2 (simplifying the maths here).
ChrisNic said:
What does the tracker track, is it the BOE base rate or the Banks base rate
BoE base rate, says so on the website.It normally depends on whether there is an arrangement fee and what % that works out at in addition to the interest charge.
The real purpose of 2 year mortgages is to keep borrowers rolling over as often as possible and paying arrangement fees every couple of years with the other upside that the life of the debt is usually extended massively as a lot of people rollover at 25 years each time.
The real purpose of 2 year mortgages is to keep borrowers rolling over as often as possible and paying arrangement fees every couple of years with the other upside that the life of the debt is usually extended massively as a lot of people rollover at 25 years each time.
DonkeyApple said:
It normally depends on whether there is an arrangement fee and what % that works out at in addition to the interest charge.
The real purpose of 2 year mortgages is to keep borrowers rolling over as often as possible and paying arrangement fees every couple of years with the other upside that the life of the debt is usually extended massively as a lot of people rollover at 25 years each time.
Which is not always a terribly smart idea! The real purpose of 2 year mortgages is to keep borrowers rolling over as often as possible and paying arrangement fees every couple of years with the other upside that the life of the debt is usually extended massively as a lot of people rollover at 25 years each time.
Interestingly, a certain bank allows you to reselect your deal every time your "rate deal" is up. I managed to fix mine @ BOE + 65bps for another 2 yrs recently without fee and keeping the term running. It might be worth asking if you can do the same. It allows you to continue to overpay and take a bearish view on rates. Sucks if Yellon is right. But personally I think she blew her load early. DA may disagree (and he's quite often on the money).
stongle said:
DonkeyApple said:
It normally depends on whether there is an arrangement fee and what % that works out at in addition to the interest charge.
The real purpose of 2 year mortgages is to keep borrowers rolling over as often as possible and paying arrangement fees every couple of years with the other upside that the life of the debt is usually extended massively as a lot of people rollover at 25 years each time.
Which is not always a terribly smart idea! The real purpose of 2 year mortgages is to keep borrowers rolling over as often as possible and paying arrangement fees every couple of years with the other upside that the life of the debt is usually extended massively as a lot of people rollover at 25 years each time.
Interestingly, a certain bank allows you to reselect your deal every time your "rate deal" is up. I managed to fix mine @ BOE + 65bps for another 2 yrs recently without fee and keeping the term running. It might be worth asking if you can do the same. It allows you to continue to overpay and take a bearish view on rates. Sucks if Yellon is right. But personally I think she blew her load early. DA may disagree (and he's quite often on the money).
Re Yellen, I think they reached the point that they had no choice but raise in order to maintain any market credibility but in an ideal world would have continued to postpone.
The issue you also have is the cost to move providers. I am currently about to switch as my 2 year fix is up, i can get a 2y fix from a different provider at 1.17% or fix with my current at 1.39%. The legal and valuation fees involved mean a move is fairly pointless in order to say 20 odd ticks, even on a fairly high mortgage amount.
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