Vari or Tracker, Help!

[Southfacing]

Hi there,

I am going into BOI to agree the terms of my mortgage tomorrow. I am not sure which product to take.

My LTV will be 86% so my options are as follows.

Vari 5.8% APR.
or
Tracker 1.6 which equates to 6.% at the minute.

Would anyone have an opinion on what I should do as looking at the mood of the ECB they could start cutting rates soon, which could mean the tracker could undercut the APR of the Vari within a short space of time.

I understand that variable mortgages usually reduce or rise soon after ECB rate movement but will this be the case in the future as the banks might keep the rate cuts due to their need for extra capital.

Also if I go with the tracker am I locked into that rate with boi for life or when my LTV rate goes below 80% would I be eligible for the tracker which is ECB +1.3 if it is still available.

I would appreciate any help.

 

[NorfBank]

Tracker. No brainer.

As for getting the other tracker - it will be down to terms and conditions of current loan offer but in the past banks let you move to the more competitive tracker if you satisfied LTV requirement.

By the way 1.6% tracker is 5.85% not 6% (if you need any more reason to choose the tracker!)

 

[ClubMan]

See the many existing threads on the general fixed versus tracker/variable question.

 

[Southfacing]

Thanks Clubman. Will probably go for the Tracker.

By the way on BOI's website they say that the APR of the 1.6 Tracker is 6%. I don't understand how this works but the apr is different that the interest rate they state. For example the 130 tracker is stated as having an interest rate of 5.55 and an apr of 5.7.

 

[ClubMan]

Thanks Clubman. Will probably go for the Tracker.

By the way on BOI's website they say that the APR of the 1.6 Tracker is 6%. I don't understand how this works but the apr is different that the interest rate they state. For example the 130 tracker is stated as having an interest rate of 5.55 and an apr of 5.7.

APRs and nominal rates are often different. The former is a "normalised" rate which takes into consideration things like how interest is charged/calculated (e.g. daily, monthly, annually) and other charges etc. affecting total cost. APR is the only meaningful comparison across different mortgage providers and offers. (Well - you can also use cost per thousand if you do it for the same loan amount and term but APR is usually easier to find as it's a legal obligation for lenders to publicise it).