February 8, 2010
Borrowers Choose Tracker Rates As Interest Rates Stay Low
The Bank of England recently decided to hold the base rate at the all time low of 0.5% for the 11th month in a row – as a result more borrowers are opting for tracker rates.
According to Legal & General, there has been a big shift towards tracker rate mortgages – in fact 43% of residential mortgages were tracker rates at the end of 2009, up from 17% in the third quarter of 2009. This wasn't just the case in residential loans – L&G found that 57% of buy-to-let borrowers chose a tracker compared to 30% in the quarter before.
But while trackers remain cheap, fixed rates are improving too – L&G found that the average three year fixed rate was down from 5.86% to 5.46% and the average five year fixed rate down from 6.42% to 5.80%.
Stephen Smith, director of housing at L&G says: “Most commentators are still expecting the base rate to stay low for some time to come, so this is a golden opportunity for people to think about paying off some of their debt. The low interest rate environment has lead to a fair bit of innovation in tracker products, what with capped trackers, reverse stepped trackers and lifetime trackers all featuring recently.”
If fixed rates are looking cheaper and trackers are remaining low which one do you choose? Good question, but one that can only be answered by a mortgage professional. They will assess your short and long-term plans alongside your assets, your debts and your earnings and from that they can help you assess whether it is more prudent to lock in to a fixed rate or opt for a tracker.
SOURCE: L&G, 04/02/10
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