October 13, 2009
Are Tracker Mortgages Best For 2010?
As the Bank of England base rate stays unchanged at 0.5% this week, is it time to admit that the base rate will stay this low for some time to come? Are tracker rates the best choice for 2010?
Ed Bowsher, lovemoney.com’s head of consumer finance says: “The Bank of England's ‘no change’ decision on the base rate wasn’t a surprise, but the interesting question is what will happen next year. Inflation hawks worry that the Bank of England has printed too much money and if inflation jumps next year then the Bank will have to raise the base rate sharply to choke off rising prices. But I don’t think inflation is set to take off in 2010 – just this week we learned that manufacturing production fell in August to its lowest level since August 1992 and that’s not what you’d expect to happen if prices were about to soar.
“We’ll probably see modest rises in the base rate next year, but I’d be very surprised to see it go over 2%. So, anyone looking for a mortgage deal should look at some of the great tracker mortgages on offer at the moment."
Ben Thompson, director of mortgages at Legal & General says: "There's been a notable shift in popularity towards tracker rates as expectations of a long period of low interest rates become entrenched amongst borrowers.Our figures show that almost one in five mortgages applied for through us were tracker rates, up from 12% in the previous quarter, and we expect this figure to rise by the end of the year."
Trackers certainly look appealing right now – the 0.5% base rate means many of them are lower than any fixed rates on the market. But trackers are not for everyone: we don't know how long the base rate will stay low, so some people may be faced with a rate shock next year. At the end of the day, no one mortgage is right for everyone and the only way anyone will truly know what deal is best for them is by talking to a whole of market mortgage adviser.
SOURCE: lovemoney.com, BoE, L&G, 08/10/09
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