Tracker Mortgages Could Be ‘Attractive’ Choice For Borrowers
Keywords: traker, rate, mortgages, good, option
Choosing a discounted or tracker mortgage product could be an increasingly competitive option for homeowners, it has been suggested.
Pointing to figures released by the Council of Mortgage Lenders, GMAC-RFC claims that fixed-rate deals have accounted for more than three-quarters of all secured loan borrowing against property since the start of this year. However, a number of lenders are reported to be increasing the price of their short-term fixed-rate products so as to allow for another interest rate rise by the Bank of England’s monetary policy committee (MPC) in the near future. Consequently, the financial services provider suggested that those looking to rein in their day-to-day expenditure may find tracker-rate and discounted mortgage deals ‘attractive alternatives’.
Julie Gaskin, corporate relations manager for GMAC-RFC, said: “In a rate rising environment it often makes sense for borrowers to take out a fixed-rate deal, especially if a future rate rise would mean their monthly mortgage repayments will increase and this has certainly been the mantra of many a mortgage expert over the last few years. However, the tide is now turning and fixed-rates currently on offer are higher than we have seen for several years, making tracker and discounted deals look increasingly attractive and in many cases cheaper.”
As a result, Ms Gaskin predicted that discounted and tracker mortgage products are set to become more popular than fixed-rates over the coming year. Figures from the lender also reported that borrowers opting for a discounted variable-rate mortgage on a two-year contract could save more than 1,000 pounds over the period of time than if they chose a fixed-rate deal which in turn could reduce pressure on their day-to-day finances.
Last year, a study conducted by GMAC-RFC revealed that some 255,000 consumers have lost money while waiting for a mortgage offer to be approved. Meanwhile, it was reported that 79,000 potential buyers have had their bid gazumped because of delays in the approval process.
Earlier this month, Moneyfacts analyst Lisa Taylor suggested that while opting for a fixed-rate product on a contract of between 25 to 30 years can offer homeowners “peace of mind”, they could find pressure to make monthly mortgage repayments increasing should the MPC choose to lower interest rates in the coming years. She claimed that choosing such an option is effectively “a long-term gamble on rates” as changes in government policy and economic climate could shift dramatically over such a period of time, leaving consumers with potentially unnecessarily high mortgage repayments.
Additionally, Ms Taylor pointed out that going for a long-term fixed-rate product may be unsuitable for those looking to move home or cancel their contract as they could be hit with high termination costs. However, those who decide that such an offer is for them were reported to be able save thousands of pounds as they would not have to pay out for arrangement fees, valuation, exit and legal costs every few years when looking to switch lenders as they would have to do when coming to the end of shorter-term secured loan deals.
Abbi Rouse writes for AllAboutLoans.co.uk, an online loans comparison site, visit us today for information on all loan topics including cheap loans applications and online loans sourcing from all leading UK providers. Our Site: news.allaboutloans.co.uk
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