Mortgage choice advice please

[RB Will]

Hi all, my first time venturing into this zone I think!

Just after a few opinions regarding the two remortgage options we have please.

Option one, fixed 5 year again, fixed rate of 5.19% giving a monthly payment of £884.
Overpayments may be up to 10% of balance at start of each 12 month period.

Option 2, 2 year tracker, currently at 3.69% (will track at BOE base rate + 0.69%). So current monthly payment £777.
Can overpay any amount at any time and leave the agreement whenever with no charge.

Generally option 2 sounds better but the wife and I are fairly risk averse and are concerned should the BOE rate shoot up. Mortgage adviser said that finance places don’t think it will go above 4%, which would be fine, but what are all your thoughts on this?
Obviously should we take option 2 and the base rate shoots up to 6%+ then trying to switch to a fixed one would leave us on a crazy rate.

Your thoughts please.

[Caddyshack]

I agree that the tracker is the way to go, rates would need to go up a fair chunk before you even hit the fixed rate.

[OutInTheShed]

The longer fix limits your risk if rates might go higher.

The tracker looks like better value in the short term.

Personally, I'm a fan of trackers and paying a market rate.

Other people may find more value in limiting their risks over the next n years.
On average I think you get the best deal by taking the risks of the market, but some people need to hedge against the worst outcomes, because one man's minor extra short term cost is another man's crisis.

I don't trust simple answers to be right for everyone.

[johnnyBv8]

I would go Option 2 at the moment. Trackers also tend not to have an early redemption charge (ERC), which gives you some flexibility if things change and you decide you need certainty.

[hotchy]

I'd go tracker. However I also advised not to fix my electric for 2 years at around 20 odd pence per unit because "absoloutely no chance will it go any higher"

Oops.

[covmutley]

tracker, and set up a standing order to send the £100 difference to a saving account.

[pistonheadforum]

covmutley said:

tracker, and set up a standing order to send the £100 difference to a saving account.

Use the difference to overpay the morgage as you won't get better interest in a savings account?

[covmutley]

pistonheadforum said:

Use the difference to overpay the morgage as you won't get better interest in a savings account?

Sure, but you wont have a little pot saved to effectively insure yourself in case the rate does go higher.

[RB Will]

hotchy said:

I'd go tracker. However I also advised not to fix my electric for 2 years at around 20 odd pence per unit because "absoloutely no chance will it go any higher"

Oops.

This is the concern lol.
What is the likelihood of the base rate going above say 5%?

[RB Will]

pistonheadforum said:

Use the difference to overpay the morgage as you won't get better interest in a savings account?

This is what I suggested to the wife.