I am currently on a fixed rate mortgage for 2 years because I like knowing how much I'll have to pay each month.

I know there are mortgage forums out there that would be a better place for this question, but what does tracker mean? I know it tracks some rate, but does it mean payments are fixed or is there still a possibility that from one month to the next, you will differing payments?

Trackers follow the bank of england base rate.
Eg for 2 years you will pay,say, 0.2% above the BOE base rate. So when the base rate changes your payments follow it up (or downn).

... and the advantage of a Tracker Mortgage is that you benefit when the Bank of England Base Rate is low... however the big disadvantage is that if it sky-rockets, as does happen, then so do your mortgage payments. You will have no idea from one month to the next what your average payments are likely to be.

Personally, I would steer clear if I could.

Ary.

I've got a tracker mortgage, it's pretty much the most common type available these days.

I wouldn't say best to avoid - that makes it sound like it's not a good deal when it is. Though if you can get a good fixed rate deal you know where you are there for the period of the offer.

I have had 2 tracker mortgages at good rates and they have been fine and have saved me quite a lot of money compared to a standard rate. If you can get a good fixed rate with all the benefits of knowing what exactly your paying for a given period themn I'd go for one of those, but these are becoming rarer these days. Also if anybody on standard rate thinks there mortgages arent going up exactly the same or higher than any base rate rise then they are deluding themselves!

With it being an almost certainty that the next move is UP. How far we do not know. Then getting a fixed is probably a good option at the moment.

I do recall though that IF IR's drop 0.25% then the banks only pass on a 0.2% drop. When they rise 0.25% the pass on the FULL 0.25%.

Either way, the bank WINS!

quote:

Originally posted by Simulcra:
With it being an almost certainty that the next move is UP. How far we do not know. Then getting a fixed is probably a good option at the moment.

I do recall though that IF IR's drop 0.25% then the banks only pass on a 0.2% drop. When they rise 0.25% the pass on the FULL 0.25%.

Either way, the bank WINS!

Not if it is a tracker, that's the point. The margin is set at a fixed amount and the BofE choose the rate.

I do rather like the term tracker, at 0.49% above the base rate for the life of the mortgage it seems a good bet, especially as there are no tie ins whatsoever (well, the one I have seen has no tie ins). Of course you are open to base rate fluctuations, but with no tie ins you can always swap to a fixed rate if you get too nervous.

The standard rate for most mortgage companies is between 1.5% and 2% above the base rate. So 0.49% is a good margin, and negates the need to keep looking around for a good deal every two or three years.

would that be for the life of the mortgage and is NOT subject to change?

If so, this sounds like a decent deal. The problem is, however, if rates wnet up to 6% (for example) the lenders will be getting twitchy. So would they dare offer a mortgage that would be less than 6.49% for a fixed period?

They know affordability would be stretched, but if they got no mortgages then they would be losing out?

Also these fixed deals arent that good are they? 4.49% for two years. With an arrangement feee of £499? Well in them two years you are paying about £21 a month plus interest on top of what you pay. So where you are saving with the low APR you are losing on paying back the arrangement fee?????

I would despise an arrangement on anything less than 5 years fixed. £21 a month for arranging is bloody expensive in my book!

quote:

If so, this sounds like a decent deal. The problem is, however, if rates wnet up to 6% (for example) the lenders will be getting twitchy. So would they dare offer a mortgage that would be less than 6.49% for a fixed period?

Of course not, I think I would only jump ship if I thought rates were to continue going up, so if the economy changed and it looked like rates were going to continue going up, I would fix at what they offered at the time. Happened in the early ninetees, fixed it at 10% when rates were similar. Rate went up to 15.5% so I made a good decision!

Yeah, the term tracker is good value, no more re-mortgaging, no more arrangement fees, just a very good deal full term.

i always thought that "trackers" moved you around from one lowest rate availabe to another
i didnt realise that you were risking to have to pay out on sharp or soaring interest rate increases too!

quote:

Originally posted by simso:
i always thought that "trackers" moved you around from one lowest rate availabe to another
i didnt realise that you were risking to have to pay out on sharp or soaring interest rate increases too!

Aaaawww bless, did you think the Banks and Building Societies were going to make sure you paid as little as possible for the rest of your mortgage? Maybe if they were state owned, but these guys are private businesses with shareholders, and them shareholders demand a good return!

Wouldn't that just be lovely if they did though. Your lendor doing all the donkey work for you and shifting your loan to the best possible rate every time they could!

Tracker (vairable) mortgages are becoming more popular because at present they are cheaper than fixed rate mortgages.

Fixed rates mortgages are selling the debt on to the money markets, and at present they are pricing in several hikes over the nest few years. Because of this most will opt for a cheaper variable mortgage, which makes them more vulnerable to rises which look set to happen.

The best example of this is in the USA. Rates went down to 1% but swap rates (fixed rates) never expected rate to get that low. So the public all had their mortgages on the super cheap variable rate, and never expected rates to go up. The problem is now rates have gone up, and people are suffering because they took on too much debt. The same looks like it will happen in the UK...

We have an Abbey tracker which is set at 0.75% above base for life. Totally flexible product. Don't get a hang up about base rates possibly going up. If you are on a fixed rate for three years and in that time rates increase dramatically when your three years are up your next fixed rate will be much higher so you will get caught anyway (this contributed to the last housing crash - end of fixed rates and doubling of payments once the offer finished). Better to have gradual increases over a long period than a massive hit very suddenly.