Cant Decide!

[DaveyC]

Hi
I can release 72000 equity from my home and these are the 2 options I have availiable to me.

A two year fixed rate currently 4.49% carries a fee of £499 and carries a 3% early repayment charge.

A tracker at 3.19% valid for properties with a loan to value of 75% or lower and it is the Bank of England base rate plus 2.69% for a maximum of 5 years this has a £999 booking fee, there is no early repayment charge on this.

I just cant decide betweent the 2, i'm basically paying £700-00 security if i go fixed and the tracker doesnt move.

I think I may go with the tracker as I can pull out at anytime and I will want to do so when my main mortgage ends. Its 5 year fixed and finishes in July 2011. I can then lump the sum together and hopefully shop around for a better deal. Where as the Fixed for 2 year would lock me down to November 2011 so my main mortgage would be on a variable rate for 4 months while I waited for the 2 year Fix to finish.

But I am a worrier, so the fix will help me sleep better at night..... Argghhh!

Any advise would be very appreciated..what would you do?

Thanks!

Dave

[DaveyC]

34 views and not one reply ?

[brian]

It's hard to tell - much of it depends on when and by much interest rates will rise in the future - but no one really has a clue how this will all develop as yet.

Personally speaking, I like to avoid early repayment charges.

[mortgage_advisor]

There is no right answer here, you seem to understand the difference between the two and the relative merits of one over the other.

The basic question is do you want to pay a premium for the luxury of a fixed rate and the security that comes with it, or do you want to take a risk withg the tracker option.

Without a complete understanding of you circumstances nobody else can offer any real advice.

The most important question I thin you should ask yourself is....

can you afford the repaymentts if they increase over the next couple of years?

..... as you face the risk of this happening if the base rate increases, and it wouldn't surprise me if, when the base rate does go up, fixed rates increase too. So calculate your payments on the current tracker rate, and then do a few more calculations assuming rate increases, see how this affects your repayments, and see how comfortable you are with it.

Not sure how helpful this is, but withgout a full factfind I can't really offer you better advice.

[DaveyC]

Originally Posted by mortgage_advisor

There is no right answer here, you seem to understand the difference between the two and the relative merits of one over the other.
.....
.....
Not sure how helpful this is, but withgout a full factfind I can't really offer you better advice.

Really appreciate the advise, I’ve decided to go with the fixed just for peace of mind. I might be doing some travelling end of next year and wouldn’t want the rates to shoot up when im not around! I did some calculations on the base rate rising by 2% and what payments I would be on and I wasn’t to happy with the amounts I could afford them but I wouldn’t be comfortable.

Many thanks again!

Dave

[rapidspeed]

Think you made the safest choice. How long will Quantitative Easing last?

If the margins were higher between the tracker and fix, it may have been better to risk it but think you made the right choice.