Fixed or Tracker rate Mortagage ??

[apmf]

Quite lately my wife(Spanish) is looking to buy a bargain property in Spain which is well below the current market rate but needs some refurbishment.

As per current market situation can anyone advice me on which Mortagage rate would be best way to go. I mean between Fixed rate and Tracker rate?

She is a FirstTime Buyer looking to put down 25% upfront deposit.

We checked with different Spainish Banks and rates are quite expensive on 10 years Fixed rate( 6%roughly) and Tracker 3.5% roughly at the moment.

I have no reason to believe that Base rates/Euribor will go any further down but chances are highly likely to go up and the fear of inflation is certainly looming around and in that case will it be any wise to go for a 10/5 years fixed rate (quite high though)?

If I am wrong and tracker rate is the way to go forward then is there any hedging option against the rising Euribor?

Thanks

 

[gedward3]

Apmf,

If you go for a Tracker rate thats gonna go up anyway as inflation increases the goverment will increase interest rates to bring that down.

What you dont wanna see is the rates going up to 7 or 8% as thats gonna make quite a big difference in the monthly payments. She is probably better going for a fixed as the only way mortgage rates are going is up. Maybe not right now but in the next year or so.

In Spain all the banks are getting their fingers burnt with the expats handing the keys back to the properties they have just lost all of their life savings in. Where they didnt lodge the properties against the Brits credit files so they could claim the difference back the banks are losing the money after auctioning the properties.

In my opinion she could rent cheaply instead of buying as there isnt going to be recovery over there for a long while as Spain was only appreciating because of the boom due to primarily UK demand. The properties in Spain should keep falling while the market is in this state.

I work as a broker so just let me know if you want me to look what deals are available apart from the High Street Spanish banks.

Ged

Quite lately my wife(Spanish) is looking to buy a bargain property in Spain which is well below the current market rate but needs some refurbishment.

As per current market situation can anyone advice me on which Mortagage rate would be best way to go. I mean between Fixed rate and Tracker rate?

She is a FirstTime Buyer looking to put down 25% upfront deposit.

We checked with different Spainish Banks and rates are quite expensive on 10 years Fixed rate( 6%roughly) and Tracker 3.5% roughly at the moment.

I have no reason to believe that Base rates/Euribor will go any further down but chances are highly likely to go up and the fear of inflation is certainly looming around and in that case will it be any wise to go for a 10/5 years fixed rate (quite high though)?

If I am wrong and tracker rate is the way to go forward then is there any hedging option against the rising Euribor?

Thanks

 

[apmf]

Apmf,

If you go for a Tracker rate thats gonna go up anyway as inflation increases the goverment will increase interest rates to bring that down.

What you dont wanna see is the rates going up to 7 or 8% as thats gonna make quite a big difference in the monthly payments. She is probably better going for a fixed as the only way mortgage rates are going is up. Maybe not right now but in the next year or so.

Ged

Thanks Ged for your quick reply. Totally agree with going for a fixed rate in that case. The difference is almost 3% between a tracker and fixed and if I take my chances for next 2 years and go for tracker now and later try to go for a fixed deal with other banks sounds like a gamble isnt it? Banks are in a worse situation but they will adjust their balance sheet in coming years, wont they ?

In my opinion she could rent cheaply instead of buying as there isnt going to be recovery over there for a long while as Spain was only appreciating because of the boom due to primarily UK demand. The properties in Spain should keep falling while the market is in this state.

Agreed, there is high probability of house prices going further down in coming years given that the unemployement rate in Spain could hit 20% soon and all other factors as u have mentioned.. But no one can predict how much further but what she is getting now is quite below the average market price and as I said she understands that she is not overstreching her limits and obviously we are not in a hurry, if a ideal mortgage rate is not available now then she might just pass.

I work as a broker so just let me know if you want me to look what deals are available apart from the High Street Spanish banks.

Thanks once again. So, can you plz tell me what kind interest rate would be considered ideal for a 10 years fixed in the mortgage market right now for a person borrowing 3 times her salary and having a excellent credit history and no outstanding debts.