Any reason not to choose tracker option

A

Adrienne41

Registered User
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Sorry if its a stupid question, but want to get it right. Coming out of fixed rate with UB, been offered a number of options one of which is a Tracker of 2.2%, this is saving us 300 euro a month and obviously the better option financially.

But wondering am I better off fixing for a set rate and peace of mind, how likely is the ECB to rise in the next few years and will I be able to fix at a later date, they mention a fee of 125 to fix later on.
 
Whats the remaining term on the mortgage and balance?
You are being fortunate to be offered a tracker, when most banks are trying to get rid of them. I would grab it with both arms if I were you/.
 
Does it make any diff what the remaining term and balance is, they is still a good few years and big enough balance, will be paying for a while yet. Will be going for it, just need reassurance..tks
 
Any fixed rate a bank will offer you takes account of (reasonably) current market forecasts of how funding interest rates will move over the term you want to fix for - and then the bank add in some buffer in order to mitigate risk of unforeseen increases, and other risks.

Even though the bank's funding rate is not matching the ECB rate, the starting point for you should be to assume you will pay a premium to be fixed over the term of the hedge. There is some correlation between the ECB rate and the bank's funding rate, though perhaps somebody else could advise on how high that correlation would be in the current environment. Even if rates rise over the term, they shouldn't rise so far that you end up better off than the bank from the act of fixing. But that's if you believe the markets can forecast interest rates reasonably.

I don't know when the margin was set on your tracker, though its sounds low (unless you're just quoting the margin). That may also be relevant to your conclusion.
 
Hi Adrienne,

you are extremely fortunate to have a contract like that, 1.25% is a good tracker (not brilliant, but good).

It is of course possible that in the next 20 or so years the ECB rate will be higher than the fixed rate you are being offered now but realistically you have the option to take the power to set your rate away from the bank. If you take the fixed rate then at the end of it you may be at the mercy of the bank.

Take the tracker.
 
Thanks guys, its my default option so Ill just let it go ahead, other half thinks we just won the lotto, hes that delighted :)
 
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