The solution to your mortgage dilemma
Can decide between a fix or a tracker? Now you don't have to.
Whether to go for a fix or a tracker rate is one of the biggest mortgage decisions you need to make -- and there is no right answer.
If only there was a way you could go for the cheap deal now and then switch over to a fix if rates start to rise -- but without all those nasty Early Repayment Charges that lenders like to hit you with.
Well now there is...
Have your cake and eat it
A new breed of mortgages allow you to get the best of both worlds, by opting for a cheap tracker deal now with the flexibility to move onto a fix if rates start to rise beyond a level you are comfortable with.
Ordinarily, if you opted for a two-year tracker you would be tied into that deal for two years. If you wanted to move to a fixed rate you would have to fork out Early Repayment Charges (ERCs) to escape your existing lender -- and they could run into thousands of pounds.
But now some lenders will agree waive these fees for customers who want to switch from a tracker to a fixed rate, and Skipton Building Society is the latest to offer such a choice.
Its new Options range allows borrowers to take one of a new range of tracker products. You can reap the benefits of a low Base Rate while it lasts, with the option to switch to the shelter of a Skipton fixed rate during the product term -- and you won’t pay any ERCs.
John Fitzsimons explains why the best mortgages offer you a bit of flexibility
Skipton isn’t the only lender to offer such flexibility -- Nationwide also offers a Switch & Fix facility on its trackers, as does Barclays Woolwich.
But are these deals any good?
Cheap and secure
Of course, if you want to take a two, three or five-year tracker it is great to have the option to switch to a fixed rate without having to pay the ERCs that would normally apply. It could help those who cannot make the decision between a fixed or tracker deal.
You gain the security of knowing that should interest rates start to rise and your mortgage repayments look likely to spiral beyond your budget, you can lock into a fix for a set period and benefit from increased security.
Plus, it’s not just the ERCs that are waived. In many cases your lender will also waive its legal and valuation fees too, meaning you don’t face the full switching costs that you would normally consider.
In that case, why isn’t everyone doing it?
Some definite drawbacks
If you decide to take a Switch & Fix you are limited to the lenders that offer this facility, and in general they do not offer the best deals on the market. In other words there is a trade-off on the mortgage rates available in order to get this flexibility.
It’s also fair to assume that if rates begin to rise, the fixed rates you can switch to will also increase, and may not look as competitive as they do now. Plus, you will be limited to your own lender, as most Switch & Fix deals will charge ERCs if you want to remortgage elsewhere.
Related blog post
- John Fitzsimons writes:
Should you pay a fee for a decent mortgage?
Some of the best mortgages in the market carry huge product fees. Is it worth paying a high fee in order to secure a competitive mortgage rate?
Read this post
Finally, you will still need to pay an arrangement fee for your new fixed rate so it’s not a completely free swap. If you switch from a tracker to a fix within a year or so, bear in mind that the two sets of arrangements fees could have a big overall impact on the total cost of your mortgage.
Any other options?
In my view there is a clever third way.
If you take a lifetime tracker rate, the vast majority do not come with any ERCs anyway, so you effectively get the same advantages of a Switch & Fix, but you can choose from the whole market.
There are some extremely competitive lifetime trackers currently available and you will usually be free to remortgage away from these at any point without paying ERCs (a handful will charge, so double check).
Then you will be able to scour the market for the best buy fix, without any limitations.
It’s a great option for those who like the Switch & Fix concept, but want their choice of the best deals right now.
And below are some of my favourite fixes and trackers:
20 fab fixes
|
LENDER |
DEAL |
RATE |
FEE |
MAX LTV |
|
2-year fix |
2.65% |
£1,995 |
60% |
|
|
2-year fix |
2.89% |
£1,499 |
65% |
|
|
2-year fix |
2.99% |
£1,499 |
70% |
|
|
2-year fix |
3.35% |
£699 |
50% |
|
|
2-year fix |
3.55% |
£499 |
80% |
|
|
2-year fix |
3.59% |
£995 |
75% |
|
|
2-year fix |
3.59% |
£599 |
70% |
|
|
2-year fix |
3.70% |
£499 |
80% |
|
|
3-year fix |
3.75% |
£995 |
75% |
|
|
2-year fix |
3.79% |
£495 |
75% |
|
|
2-year fix |
3.89% |
£945 |
80% |
|
|
2-year fix |
3.99% |
£599 |
80% |
|
|
2-year fix |
4.18% |
£995 |
85% |
|
|
5-year fix |
4.29% |
£1,499 |
65% |
|
|
5-year fix |
4.29% |
£999 |
65% |
|
|
5-year fix |
4.69% |
£995 |
75% |
|
|
2-year fix |
5.15% |
£894 |
90% |
|
|
3-year fix |
5.39% |
£495 |
85% |
|
|
2-year fix |
5.49% |
£995 |
90% |
|
|
2-year fix |
5.49% |
£999 |
90% |
20 top trackers
|
LENDER |
DEAL |
RATE |
FEE |
MAX LTV |
|
2-year tracker |
1.99% (Base + 1.49) |
£999 |
65% |
|
|
2-year tracker |
2.19% (Base + 1.69) |
£945 |
60% |
|
|
2-year tracker (remortgage only) |
2.19% (Base + 1.69) |
£1,495 |
60% |
|
|
2-year tracker |
2.29% (Base +1.79) |
£99 |
65% |
|
|
Term tracker |
2.29% (Base + 1.79) |
£99 |
60% |
|
|
2-year tracker |
2.29% (Base + 1.79) |
£995 |
60% |
|
|
Term tracker |
2.35% (Base + 1.85) |
£945 |
60% |
|
|
2-year tracker |
2.39% (Base + 1.89) |
£999 |
60% |
|
|
2-year tracker |
2.48% (Base + 1.98) |
£845 |
75% |
|
|
Term tracker |
2.49% (Base + 1.99) |
£599 |
70% |
|
|
2-year tracker |
2.49% (Base + 1.99) |
£945 |
75% |
|
|
Term tracker |
2.49% (Base + 1.99) |
£99 |
65%
|
|
|
Term tracker |
2.99% (Base + 2.49) |
£999 |
70% |
|
|
Term tracker |
2.99% (Base + 2.49) |
£599 |
80% |
|
|
Term tracker (remortgage only) |
3.09% (Base + 2.59) |
Fee-free plus £300 cashback |
70% |
|
|
Term tracker (remortgage only) |
3.29% (Base + 2.79) |
Fee-free plus £300 cashback |
75% |
|
|
2-year tracker |
3.49% (Base + 2.99) |
£995 |
85% |
|
|
2-year tracker |
3.75% (Base + 3.25) |
£995 |
85% |
|
|
Term tracker |
3.99% (Base + 3.49) |
£999 |
85% |
|
|
Term tracker |
4.29% (Base + 3.79) |
£99 |
90% |
More: Find a competitive mortgage | An easy way to choose the right mortgage |The mortgage to kickstart the housing market
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At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.
This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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