joey said:
As I'm going fixed for the first year I don't have to decide my option for year two til the end of year one or at least this is what I have been told?
But if you choose the mortgage now and the tracker rate on offer and to which you will be switched in year two is not competitive (e.g.
ECB + 1.25%) then the only way to get a better deal is to remortgage in year two and this can involve significant legal costs and hassle in some cases. You need to largely forget about the one year introductory discounted fixed rate offer and concentrate on what will be charged from the bulk of the loan term. This is a distraction in the greater scheme of things.Your broker/lender should be able to tell you what the tracker rate is right now that you will be switched to. This will not change one year down the line (well - the margin will not change but the base
ECB rate could). It is wrong to say that you can take the introductory one year discounted fixed rate for now and worry about what the normal rate from year two onwards will be later on. Get the best deal on offer now and chances are you won't have to remortgage later on. If you also get a good one year introductory discounted fixed rate then treat that as a bonus but don't let that influence your decision undluly. You will only be paying the discounted rate for one year but you will be paying the "normal" rate for 19 (or 24, or 29 etc.) years and that will make all the difference!
The reason I was opting for the tracker mortgage is because I was told it is the cheapest?
Tracker mortgages are not necessarily cheaper per se. But a tracker mortgage with a competitive rate (i.e. margin above the
ECB rate) is a good bet on minimising interest costs over the lifetime of the loan. On the face of it
ECB + 1.25% is not competitive and you may be able to do better elsewhere by shopping around. Your broker really should be ferreting out the best deal for you and, at least, quoting accurate rates on offer. On the face of things this is not the case but I don't have all the information about your case.
What would your recommendation (re mortgage type) be?
See the best buys list. Grill your broker. Shop around independently. You were supposed to close a week or two ago but this does not seem to have happened so perhaps you still have more time on your hands than you originally thought to get the best deal? Even if it means taking a day off work and just shopping around for the best deal and mortgage approval (in person, by phone and/or online) it could be money well spent.