Confused re tracker Mortgage

kulekat

Hi all,

I am trying to decide whether or not to a) switch my mortgage, and b) get a tracker mortgage. My Loan to value is 75%, and with my current mortgage provide the '% margin above the ECB rate' is 0.95%. My building society told me that I would have a tracker interest rate of about 6.5%. My problem is I havn't a clue what that means.

my current rate is 3.9%, and it was a 2 year fixed, which is just up. I had it in my head to get a fixed 10yr, just in case interest rates go crazy in the future. I am also renting out this house (am not living there myself, so its an investment), and am getting ~250euro extra per month from it after paying my mortgage.

So, my real question is, what is the advantage of getting a tracker mortgage? Do the repayments vary per month?

Thanks a mill!!

sarahhurray

6.5% is very high! The ecb( the rate our banks buy the money at) rate is 4% so that would be a margin of 2.5%. Your current mortgage provider is offering 4.95%, a margin of .95%

The repayments can vary up or down with a tracker mortgage as they do with a variable mortgage. So with your current provider's offer if the ecb rate fell by .25% your rate would drop by .25% similarly if they go up .25% so does your interest rate.

If you pay want to pay back a fixed early you will have penalties. If this is not likely and you want to be certain what the payments will be then it may make sense to go fixed. In France they do so for 20 years, the average length of a mortgage there.

bobk

Tracker rates are more transparent than the standard variable rate in that it will always remain a certain percentage above the ECB rate.

The standard variable rate is generally a higher rate than tracker so i would always recommend a tracker over a variable.

You are not tied to a tracker rate and can switch from it at any time.


Fixing the rate is another option especially with the uncertainty in the market at the moment. It will offer you stability for the period of the fixed rate, but might not be ideal if you plan on selling the property before it ends.

snapplejacks

Just noticted this thread regarding tracker mortgage and thought I’d ask something.
My 3 yr fixed (Halifax at 4.49% approx) is due to end in July. As cost of mortgage switching is getting so expensive I now would prefer to have a fixed over a longer term (say for example 10 years).

My problem therefore is – currently rates are going down and I am most likely going to miss a lower rate if the rates drop further after I complete my remortgage application. So is there absolutely no way once I enter into 10 year fixed that I could TRACK lower rate and then fix it at that rate for remainder of the term ?!


Thanks.

bobk

Firstly snapplejacks, you can switch your mortgage for free. There are several banks in the market that will pay your legal fees and any broker worth their salt will cover the valuation fee for you - meaning that it will cost you absolutely nothing to change lender.

Re rates, the ECB seems very reluctant to lower rates and no doubt will hold off for as long as possible to. There are no guarantees that rates will go down.

The product that you are looking for is called a capped tracker rate. Means that it will go down but it won't go up beyond a certain point agreed with the bank.
IIB were the only bank to do this product but, as far as I know, have recently taken it off the market.

Unfortunately when you fix now, you are fixed in and will be penalised if you break this.

We Are Leeds

...........

christeb

LOL:D
"I don't know what a tracker mortgage is"!!!!
Sorry but I had to put that in, my buddy works in the Financial Regulator so I'm always yanking his chain about that

sarahhurray

snapplejacks you don't need to switch mortgage when your fixed rate is up. Ring your current mortgage provider and ask them what they have on offer, you should be able to arrange it over the phone. Of course if you're not happy with what they offer you can switch.
If you go fixed and want to change to variable or tracker before the fixed period is up you will have to pay some hefty fees, get the bank to clarify what these are likely to be.