Should You Get a Tracker or Fixed Rate Mortgage?

With mortgage rates going up and down, it’s a confusing time in the world of property finance.

In this video, we’re going to discuss the pros and cons of getting a tracker or fixed rate mortgage. We’ll cover some of the key factors to consider when making this important decision, and help you decide which option is right for you.

If you’re wondering what to do about your mortgage, be sure to watch this video! We’ll discuss the pros and cons of both tracker and fixed rate mortgages, and help you make the best choice for your unique circumstances. After watching this video, you’ll know exactly what to do next!

The mortgage Market is a confusing place right now after 14 consecutive Bank of England base rate increases we did have a brief reprieve last month but with inflation stagnating and rate changes happening daily it’s really difficult to understand what to do with your mortgage and don’t even get me started with swap

Rates the big question I’m being asked all the time is Sam should I opt for a fix rate or a Tracker rate right now well the answer to question is hello everyone welcome back to the channel it’s Sam here now before we get started please don’t forget to subscribe

To the channel hit the notification Bell so you don’t miss any future videos and if you wouldn’t mind clicking a little like on this video that would make my day it really helps me grow my channel as I aim to hit 5,000 subscribers by the

End of the year so it might just be one little click for you but it means a hell of a lot for me now back to the video and today we’re going to be discussing the big question in the mortgage world right now should I be going for a

Tracker rate or should I be going for a fixed rate now to be perfectly honest I’ve been a mortgage brok for 16 years and I can certainly tell you for nothing that over that period of time the number of fix rate mortgages that I’ve applied for for my clients versus the number of

Tracker rates has been huge there’s definitely been a huge swing in the direction of fixed rates most of my clients are investors and as a result many of them traditionally have been going on a sort of a 2-year cycle of fix rat because as my clients grow their

Portfolios what they want to be doing is taking advantage of growth in the market in terms of house prices and pulling out cash every couple of years basically what that means is that they will be opting to Rel leverage up to 75% every time they refinance namely every two

Years and what that means they can pull out one two three maybe more, that basically just goes into a pot and contributes towards their next purchase it’s a really good way traditionally of building a portfolio by Rel vering and reping out money out of your existing portfolio to keep it growing of course

When you have reached the end and you don’t want to grow your portfolio anymore that’s a different story altogether but most of my clients are still in the phase of growing their portfolio so traditionally it’s always been the fix rate then when the bank of England started on their crusade to

Increase the base rate and as I said earlier 14 consecutive increases really did put a lot of strain on the market as a result we saw a major swing from the 2year cycle that I was seeing on a lot of fix rates to 5year fix rates and

Really this all came down to loan size as I’ve said before when it comes to buy toet mortgages it’s down to how much the property earns not what you earn when it comes to how much you can borrow lenders use something called rental calculators using the rental income to calculate how

Much you can borrow they do this by usually stress testing the interest rate I.E whatever interest rate you’re going to pay they will add a percentage on top of that and they’ll use that to determine what the monthly payment would be at that rate and how much the rent

Needs to be to be able to cover that now with rates Rising that has meant that it’s been even more difficult for existing rental incomes that have happened across the UK to work within the rental calculators to get the magic 75% that we’re all aiming for however

When it comes to fixed rate mortgages most lenders actually don’t stress test the interest rate when it comes to these rental calculators and as a result as rates have gone up it’s been harder to get the loan size that we want to get to more and more borrowers have had to opt

For those 5year fix rates otherwise they may not actually be able to get to the level of borrowing that they want to get to but is it still the right thing to opt for a fix rate right now and moveing into 2024 well if you believe what’s

Happening in the media at the moment you’ll probably be thinking that the bank of England has pretty much reached the end of the line when it comes to increasing the base rate I.E there isn’t really much more in the tank I’ve gotone on record to say that I think that 5.75

Is the absolute Max they’ll go to which means another half a percent potentially to reach the absolute Peak when it comes to the base rate although that not is not set in stone and to be perfectly honest we could very well already be at the peak of where the base rate is going

To get to now if that’s the case then really what we’re thinking then is that the base rate can only go one way and that’s down now I don’t for one second think that we’re going to be reaching down to the 0.1% base rate that we’ve been having

Basically for the last 10 11 years but certainly if we’ve reached the Peak at the moment there is only one way that the base rate can go and that is down now it remains to be seen when the base rate is going to start to go down I’ve

Gone on record to say that I think that the absolute quickest that that’s going to happen is going to be beginning of quarter 2 in 2024 I think that really until inflation gets to around 3 and a half% the bank of England will have no intention of

Reducing the base rate and I think think the earliest that can probably happen is around that time honestly I think that’s the earliest but if I’m going to make a true prediction we’re probably going into sort of May maybe even June before the base rate starts coming down in my

Opinion that said most tracker rates are tied for a 2year period which means meaning if you are going to be remortgaging soon or you’re going to be taking out a new mortgage over the next couple of months over that 2-year period the base rate is only going to go one

Way and as the name suggests a Tracker rate tracks the base rate from the bank of England so although right now the average tracker rate is ever so slightly higher than its fixed rate counterpart that should start coming down pretty swiftly and what this means is that by

The end of your term you may very well actually be on a much lower rate than what you would have been on if you’d fixed so off the back of that you’re probably thinking well it’s obvious Sam opt for a Tracker rate well it’s not quite as simple as that this tracker

Rate is only going to start coming down when the base rate comes down and as I’ve said previously it’s anyone’s guess as to when that’s actually going to happen it’s very much down to when inflation rates are going to start coming down and as we’ve just seen this

Month it stayed the same at 6.7% we didn’t see any drop which is actually not what we were predicting at the beginning of the year Rishi sunak our prime minister said that he was aiming for the inflation rate to get below 5% by the end of 2023 and with it being on

November next week it’s highly unlikely that we’re going to get to that point by the end of the year as a result there is going to be increasing pressure on the bank of England to either put up their rate or to maintain that rate for a much

Lengthier period of time than we first thought so if the base rate is going to stay the same or even maybe go up slightly and then stay that way for 9 months 10 months maybe even a year we are starting to get into the territory where a track rate isn’t going to be

Cost effective so really guys it’s all down to when we think the base rate is going going to go down so essentially what I’m saying is is anyone’s guess it’s all about making an informed decision and hopefully the information is video has helped you with that but of

Course it’s always best to consult a professional mortgage broker who can make you understand what’s going to be best for your personal situation at Grand Union Finance we specialize in mortgages for property investors so if you are in need of a remortgage or you want some advice on how to actually plan

Your next few mortgages over the next year or so the best thing to do is to use the link in the description to get in touch with us me and the team at Grand junion finance and we can advise you personally on what you should do thanks again for watching guys as I

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