Why not change to a tracker mortgage?
Fixed-rate home loans may be in mode, but with a reduction
in rates imminent it would be advisable to consider the
tracker option instead.
Fixed-rate mortgages have been very popular in recently but
with all the talk about interest rate cuts, a tracker
mortgage could be the way to go.
Even though interest rates were kept on hold last month,
there are indications that the short and long term trend is
downward. A tracker mortgage would be a sensible option as
it follows the movements of the Bank Of England base rate.
According to the Council of Mortgage Lenders, fixed rate
mortgages reached a peak in August 2007 and they accounted
for almost 80% of all mortgages taken out in the UK.
Fixed rate mortgages appeal to those who want to know
exactly how much their repayments will be each and every
month and are an attractive option in circumstances where
there is an upward trend in the interest rates.
However, most experts now agree that the interest trend
will be downward therefore the tracker mortgage will be the
most appealing as many will worry about fixing an interest
rate at the peak of it’s cycle.
A tracker mortgage is named in this way since it tracks the
movements of the base interest rate from the Bank Of England.
In effect it caclulates the mortgage repayment based on the
base rate of the day and adds a fixed percentage to this
rate. So as interest rates fluctuate the mortgage payments
move accordingly. This could be deemed an ideal mortgage
when the trend of interest is downward. Since, when the Bank
Of England rate falls the mortgage payment also falls. The
amount that is charged over the base rate will vary from
lender to lender.
With tracker mortgages you can choose to have a fixed
period, such as two or three years, where the mortgage
interest rate will track the Bank of England base rate. Once
this period had expired the mortgage will revert back to the
standard variable interest rate charged by the lender.
With this kind of mortgage there are the options to revert
to a tracker for a fixed period which is usually 2 or
3 years. During this period the mortgage repayment will be
based upon the base rate from the Bank Of England. After the
agreed tracker rate period expires then the mortgage will
revert to the standard variable rate. The advantage of
choosing this product during a period of interest rate cuts
is that your repayments will decrease during this period
and after the expiry date you can review your options again.
tracker mortgages
remortgages
Turbo Tagger
November 28th, 2007 - Posted in Remortgages | |
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