Thanks all for your responses.

I've decided to go for the tracker to begin with. It is fee free and I can switch to a fixed rate at any point. I'm happy to take a bit of a risk, the monthly repayments are only about £690 a month which is tiny so even if the base rate jumps by a couple of points it would still be affordable.

I am backing base rates to stay where they are for another couple of years (barring financial apocolypse in the Euro zone) and if rates do start creeping up I guess it is just about being proactive and moving as quickly as possible to fix myself down at the lowest possible rate at the time.

A bit of a gamble I guess, but could be worth it if I stay at 2.49% for 2 or 3 years.

Yes, you are correct, I was simply making my own points and priorities. My advice was based on what I read, plus my own experiences.

It does essentially boil down to risk assessment if you like, but it does seem to me to be entirely sensible to have a debt that is predictable over a period of time, that is more easily dealt with because it is stable, rather than fluctuating and therefore considerably more difficult to budget for.

Your counter argument is also entirely valid. Horses for courses I suppose! :o)

Sorry Skywalker I disagree.

What you have made is a statement based on your own attitude to risk and this is not enough to pigeonhole every other person who may want to look at different rates.

Each and every person will have a different attitude to risk which is often dictated by the budget that they have available and if the budget is close to maximum affordability then most likely the fixed rate may be the best option, but quite a few of these people may still feel that other rates would offer a more cost effective repayment but threatens a risk for soing so.

While a fixed rate does give a guarantee of knowing what your payment will be for the next 24/36/60 months it also offers a pretty cast iron guarantee that you will be paying more than someone who has taken a variable rate mortgage and this is where the attitude to risk come into play.

If you were paying a fixed rate of £500 per month but could get a variable rate for £450 per month would you want it if you felt interest rates were not going to move for the next 2 years? over 24 months it could save you £1200, thats lot in anyones book. If it was over 60 months its £3000. You stand to take the risk that rates won't go up but in most cases now the variable rates are about 0.50% cheaper than fixed rates and so that means (most likely) 2x interest rate rises just to break even with the fixed rate products, and as most analysts (who generally set public opinion and not get shot down by it) think we have quite a while before interest rates rise (they have been right for the last 18 months) it would mean that overall a varibale rate mortgage would definitely be the choice to go for as it would mean that interest rates would have to rise by 3 rate rises in the first year to make it less cost effective than the fixed rate. If you are looking at longer term fixed rates then the difference between variabnle and fixed rate could be 2% - 3% and thats going to make a big difference on anyones mortgage repayment. Of course it also has to ne noted that there is no cap on most variable rate mortgages so the sky is limit so far as rate rises and how high a variable rate mortgage can go.

However. All this is a moot point if every single person on the planet opted for a fixed rate because it gave a guarantee that you had stability and could budget...soon the new fixed rates products would rise in cost to fill bankers pockets and the variable rate would then become very attractive.

Its all about attiftude to risk - Either you get a cheaper product but run the risk of rate rises and (potentially) losing money or you don't run the risk but know you will pay more for your rate right through until the rates rises (if indeed they do)

Just because you feel safer with a fixed rate does not mean that everyone else will feel the same way.

So far as being able to overpay on any particular mortgage. nearly every single mortgage on the market has the facility to over pay by at least 5% of the outstanding balance per year and more often most lenders will allow 10% of the outstanding balance per year but the thing is that most of the people who would take a fixed rate on a purchase mortgage would be right at the maximum of their affordability and so the likelihood of them actually making an overpayment on their account is extremely low. It is very rare for any mortgage I have set up for anyone where they have intentionally overpaid on the mortgage because quite franly most people will think of 1001 other things that they would rather spend their money on than the mortgage.

But as it happens I 100% agree with you that the priority should be to clear the mortgage as quickly as you can through overpayments where possible and reducing the term on remortgage

Variable rates are cheaper because they can change in a month.

Annalists are cannon fodder to public opinion, and prisoners to bankrupt surveys.

Fixed rates give you a clear position to budget with clarity. As I said, fixing will give you certainty, but make sure you have the position to overpay without penalty.

Sorry Zeb, but this is more of an answer, than a non answer. The key is overpayment, in this case, in my view.

Skywalker:My view is that interest rates are about as low as they can go, and if that is the case, then the only way is up. The question is when!

This is the big question that everyone wants to know and with variable rates so much cheaper than a fixed rates there can be quite a difference between the repayments. Most analysts seem to think we could be waiting up to 2 years for an interest rate rise and if that is the case then you could likely get a lower rate tracker and pay less for most if not all of the 2 years and save a few quid against a more costly fixed rate.

It is rarely possible to decide for someone what the right answer is without knowing their circumstances and attitude to risk and with Nge101 it is even trickier as he comparing against the even more costlier fixed rates for 5 years and the gap is even bigger between the tracker rates rates and 5 year fixed but the term of security is far longer and will almost certainly cover a time when rates are rising but the cost difference between the 2 will be far larger.

Going by my general rule of thumb I would often encourage a first time buyer to consider fixed rates so that they know and can control their budgets a little better and to give them just that little bit more security and stability on their mortgage payments but this is generally because the applicants are buying at just about the limits of their budget. I get the impression that Nge101 is well inside the his limits and could afford more if needed so this means that the risk to household budget is less of a worry and so the only thing I would add further is that a rate of 3.5% for a 5 year fixed is unlikely to be seen again for many many years once rates rise and so if this increase in monthly cost is within budget it might very well be a prudent choice.

Sorry for a bit of a non answer, I would suggest that if you cannot make your mind up then you should visit a mortgage broker who can go through budgets and things and evidence what rates may suit better.

My view is that interest rates are about as low as they can go, and if that is the case, then the only way is up. The question is when!

In your position I would opt for the fixed rate, simply for peace of mind. I would also want to be able to make overpayments without penalty.

I realise this is probably a question that is asked a lot and none of us have a crystal ball for what interest rates will do over the next few years but was wondering what people would do in my situation.

I am a first time buyer and have just had an offer accepted on a property. I need to finalise my mortgage arrangements.

The offer I have had accepted is for £402,000. I have a deposit of around £250,000 from savings and bonus which gets me above the 40% cut off which seems quite key.

I can get a tracker at 1.99 above base with HSBC which is completely free of any charges OR i can look at 5 year fixes at around 3.5% and 4%.

Just wondering what people would do in my situation.

Thanks