To Fix or not to Fix that is question

Personally I'd be very reluctant to fix at any time but that is not an absolute position. Reasons why I wouldn't fix are the lack of flexibility in changing my mortgage and the premium required. Those reasons never really change. Reasons to fix would be the need for an assured repayment amount. That would be my primary consideration. I would consider at the moment whether it is worth fixing since ECB rates are low but personally I don't think I would be a winner, I think the bank would be. While I acknowledge that you are more likely to get a good fixed rate now - I think that reflects an interpretation, a gamble on the part of the bank that rates are not likely to rise at a steep rate in the next two years. I would tend to agree with them - there does not appear to be a significant likelihood of inflationary pressure encouraging the ECB to raise rates quickly within the next year or two years. For me it would mean a loss of the tracker rate, immediate payment of a higher mortgage interest rate and limitations on capital overpayment (which I am currently taking advantage of the low rate to increase this). For me these outweigh any benefit I might acquire from an increase in ECB rates within the next two to five years. However when I first got my mortgage I stress tested the repayments by a sizeable margin so I know that they are affordable even with a sizeable jump in the base rate, if I had not that comfort of affording a bigger repayment if needs be, the incentive to fix would be much greater - a reflection of a requirement for certainty.
 
We're on a tracker and paying 1.85% at the moment I believe. Our mortgage is about 25% value of house - would you recommend fixing?
 
Robin Banks said:
keep the tracker, its the closest thing to free money you're ever likely to get.
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I agree. Its actually better than free money. You can make money out of it

I have mortgages left on only 2 properties. I changed them to trackers at ECB +0.8% on them a few years ago.
I couldnt be bothered paying them off now because the money makes more on deposit. When that changes i'll move it from deposit to eliminate the mortgages altogether.
 
Toby, the only reason to want to fix is that you need to know exactly what your outgoings are in a given month - if you do not need that certainty I wouldn't, you would be unlikely to gain. The banks will set a rate that will be higher than your current rate and will probably include some leeway for them in terms of rate rises over the term of the fixed period. You would also probably not come out of the fixed period back onto a tracker mortgage.
 
Its interesting that many people regard a fixed rate mortgage as been appropriate for people who's finances are tight. The reality is that a fixed rate mortgage is a luxury product and it is the tracker that is the no frills product.

When you take out a fixed rate mortgage, you are paying the bank to take the interest rate movement risk away from you. Paying someone to take a financial risk is usually more expensive than the value of the risk. So, as a general rule, people with fixed rate mortgages will pay significantly more in repayments.

Fixed rate mortgages should be for people who are wealthy enough that they are willing to pay for the privilege of not having to bother with monitoring their interest rate!
 
I'd agree that fixed rate mortgages are an indulgence, the only reason I can think of to go on one is that you want to know what the payments will be for a fixed period of time (you'll note that I didn't mention anything about tight finances ). Personally I wouldn't fix unless I really, really needed that certainty (say I was going abroad for two years and wanted to be able to plan out repayments).
 
csirl said:
Fixed rate mortgages should be for people who are wealthy enough that they are willing to pay for the privilege of not having to bother with monitoring their interest rate!
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But they can also be for people for whom finances are tight enough for them to want to insulate themselves against any unexpected hikes in interest rates over, say, the next 5 years.
 
But, if finances are tight then surely they wouldnt be able to afford the extra that a fixed rate mortgage costs?
 
Yes, but on a variable, interest rates could quite easily increase sufficiently over a 5 year period to exceed the repayments of a 5 year fixed couldn't they?

I know what you mean in that it could well be a struggle for some (and unnecessarily so) but for these poeple, the security is probably worth it in the long run.
 


But lok at all they people complaining about being stuck on a fixed rate now. They all think they have been conned and that the bank screwed them.
 
minion said:
But lok at all they people complaining about being stuck on a fixed rate now. They all think they have been conned and that the bank screwed them.
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Yeah, well I'd rather not look at them thanks. No pleasing some people.

They're the kind of people who on grand national day would go on endlessly about the horse that "they should have backed"
 
Thanks, we've decided not to fix, reckon the tracker we have is worth holding onto long term as switching to fixed might save us a bit if rates shoot up now but after the fixed term ended we would have little control over what rate we were forced to pay. So, we might have a few tough years if rates shoot up but in the long run the tracker seems the safest option.
 
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