Stay with tracker mortage or move to fixed rate?

Discussion in 'Mortgages and buying and selling homes' started by Salvadore, Apr 16, 2018.

  1. Salvadore

    Salvadore Registered User

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    10
    Hi all

    Currently have about 7 years to go on a 20 year mortgage of 300,000. Have a tracker mortgage that costs about 1450 a month with Ulster Bank.

    I know that trackers are generally jealously guarded but I'm conscious that interest rates can only go one way. I'm wondering whether I would be better off moving to a fixed rate that would give me certainty over the last few years of the mortgage.

    There's about 128,000 outstanding on the mortgage and the house is worth about 750,000.

    Any advice appreciated.
     
  2. David1234

    David1234 Registered User

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    41
    What is your current rate? ECB +X%

    What age are you and how affordable are the current repayments?

    Assuming a rate of ECB + 1% I would be very surprised if you would save money by switching to a fixed rate v's leaving it on a tracker for the 7 years. You may however pay less total interest if you moved it to a variable rate and overpaid each month, in turn reducing the mortgage term. This obviously depends on your ability to overpay.
     
  3. Salvadore

    Salvadore Registered User

    Posts:
    10
    Thanks for your reply David.

    I'll still be of working age when 7 years is up. The repayments are comfortably affordable and I could probably increase them by a few hundred a month if to do so was really beneficial but

    I presume it's still possible to overpay on a tracker?
     
  4. Brendan Burgess

    Brendan Burgess Founder

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    35,478
    Salvadore

    With a balance of €128,000 and around 7 years to go, it means that your tracker rate is about ECB +.5%

    This is what the next 7 years will look like if interest rates stay the same

    upload_2018-4-16_16-48-35.png

    Ulster Bank's cheapest fixed rate over 7 years is 3.29%

    So you would be paying in the first year an additional €3,500 in interest for the comfort of fixing.

    What is a likely outcome? That in year 3 , ECB rates may have risen to about 3% - so you would be paying 3.5% on your current tracker.

    But you will have paid an extra €6,000 in the meantime for the security of fixing.

    Definitely don't do it.

    And yes, you can overpay your tracker at any time.

    Brendan
     
  5. Brendan Burgess

    Brendan Burgess Founder

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    35,478
    This makes no sense. A tracker rate is a variable rate and can be overpaid at any time.

    Brendan
     
  6. Salvadore

    Salvadore Registered User

    Posts:
    10
    Many thanks Brendan for your very comprehensive reply. Much appreciated.