Daily Mirror - Should I get a fixed or tracker mortgage?

With base rate largely expected to drop by 0.75% over the course of the year, it would be difficult not to consider tracker rates at this time, many of which has no early repayment charges. By doing this, people can benefit from potential rate reductions whilst keeping the option to switch to a fixed rate as a back up. Anyone on a tigher budget or seeking stable payments must elect for a fixed rate. Choosing between a 2, 3 or 5 year fix though is entirely down the individual circumstances and preferences.

This question is one that we are being asked every day, it is also asking if we have a crystal ball and to predict the future. Whether you opt for a fixed rate over a tracker product really comes down to you as an individual, your priorities and how important budgeting is to you. Generally tracker products are currently more expensive than the equivalent fixed rate, therefore we aren't seeing much interest in these at the moment even though the forecast is that the base rate could drop at some point this year. When this happens and how much it falls is a complete guessing game at the moment with mortgage rates back on the increase.

If the current crazy gang weren’t in charge of monetary policy the answer would be predictable and easy, opt for a tracker because inflation is falling and the economy is weak so rates will plummet. Unfortunately for homeowners, and the country, we have lunatics stashing the cash in the Bank of England afraid that inflation could still get hold. Two members voted to increase rates at their last get-together despite all indicators showing this is bad policy.

There's no hard and fast rule, unfortunately. Whether to go Fixed or Tracker varies from person to person. It is determined by your appetite for risk and your personal and financial circumstances.
Tracker rates have been competitive but they are priced above the fixed rate alternatives. If you can afford the higher payments you may benefit in the near future if the base rate falls. There are often tracker rate products with No Early Repayment Charges, so you can jump ship if needed.
Fixed rates provide certainty, and this can be invaluable for people that want to manage their monthly budget. The bigger question is how long you should fix for? Again, the answer differs from borrower to borrower, this can be impacted by a multitude of factors; life events, short to medium term plans, the products available or need for certainty.
Speak with a Broker and be sure to enquire about all mortgage options, in times like these all product types should be considered and discussed.

For most customers a Tracker is the halfway house that allows them to step back and maybe have some breathing space to decide how to best progress. You have to be careful to ensure that a Tracker rate you select does not have any Early repayment charge attached, otherwise a nasty shock may await you. Most people who select a Tracker has decided to do so because of a reason, this may be that they want to sell the home but are at the end of the current fixed rate and they do not want to lock in again, it may be that they feel rates may fall and want to take advantage of this redcution when it happens. A fixed rate will be cheaper on rates but would not offer the flexibility to switch with no penalties so it does allow some freedom but comes at a cost, these tracker rates will be more expensive on the rates. I am not seeiing people choose a Tracker because they believe the base rate will fall and it will be a better deal over the medium to long term. Its more about keeping options open.

This is the age-old question! We tend to discuss this with clients by breaking down the key reasons they may consider one over the other:

Fixed = Certainty of payments and lower initial payments (at the moment!). Potentiall higher costs than a tracker over the fixed period if rates fall, and high costs to exit the deal if circumstances change.

Tracker = Flexibility to exit the deal if circumstances change without financial penalties, and potentially lower overall costs if rates fall during the time it's held. However, at the moment, most tracker rates are higher than the equivalent fixed rate so there's an initial premium to be paid for this. If rates rise, this could also be very painful if this hasn't been stress-tested properly to make sure payments could still be afforded.

It's also the case that fixing can often mean there's a higher borrowing capacity available so a tracker may not be an option where high income multiples are required.

The answer to this depends completely on ones circumstances. If the decision is based purely on price then I would say a fixed rate would be better, particularly over 5 years, but if someone wants complete flexibility with no penalties for early repaymnet, then a tracker mortgage may be the right choice. The problem with trackers is that because the Bank of England base rate is expected to remain higher for longer the tracker products could prove more costly over their term. Advice is crucial!