Tracker mortgages the way to go

Posted 2007-12-17

According to mortgage broker John Charcol, tracker mortgages are better value than fixed-rate contracts because borrowers are not permanently committed to lender rates. 

Ray Boulger, senior technical manager for John Charcol, claims trackers have “really come into their own” following the Bank of England’s recent cut to interest rates. With only a few lenders lowering their rates accordingly, a variable mortgage provides a lot more protection. 

Boulger noted: “We have seen over the last few years there is always a proportion of lenders who do not move their rate in line with the Bank’s rate.” 

“Most of the time a tracker mortgage is a quarter of a [percentage point] higher than a fixed rate mortgage, providing the starting point is good.”

Looking ahead, Boulger predicts that trackers will continue to sell strongly in the near year despite some lenders reducing the number of mortgages in their portfolio due to the credit squeeze.  Lenders are not expected to place restrictions on them as base rates fall. 

Boulger does not expect there to be a significant rise in the number of people switching mortgages in 2008. 

He added: “The reality of people deciding to look at their mortgage product is based on whether the value of a discount mortgage is cheaper than a tracker mortgage or vice versa.”

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