To Track or Fix your mortgage? That is the question
- 8th March 2010
- Buying Property News
Mortgage industry pundits are divided over whether its best to fix before rates rise or save cash from trackers.
A report in the Observer highlights the quandary of a potential panick buy of fixed rates mortgages. Borrowers will be seeking certainty in this unpredictable economic climate and a general election just around the corner. Whilst lenders are encouraging the fixed rate route, mortgage brokers feel that borrowers could end up paying over the odds.
Some leading mortgage brokers are advocating taking advantage of comparatively low tracker rates to over-pay the mortgage and save for future rate rises.
Ray Boulger, of John Charcol mortgage brokers, recognises that the election, fiscal stimuli and a cut in public spending will cause volatility but told the Observer: "I see no point in fixing for two years, because rates will still be going up. If you are going to fix, it needs to be for at least five years, but then the differential between the best fixed rate and best tracker is about 2.5%. You will be paying a big premium for the protection afforded by a fix."
David Hollingsworth of London and Country mortgage brokers advises borrowers on trackers to use any spare cash to pay off the mortgage and or put into savings to buffer against future interest rate rises.
HSBC puts it simply. If you cannot afford a rise of more than 3% in your mortgage rate go for a fixed rate.
The Bank of England base rate still remains at 0.5%, but economists and mortgage market pundits this will soon change. The prediction is that interest rates will rise over the next couple of years. Barclays predict that interest rates could be 6.5% by 2015.
Mortage options fixed versus tracker -
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