Fixed rate mortgages and tracker mortgages are the most popular loans on the market. Whilst all borrowers seek the best mortgage rate, there is still a lot of guesswork involved regarding which one is right. If economists can't agree on the direction of interest rates, what chance does a layman have?
Are Fixed Rate Mortgages or Tracker Mortgages More Popular?
Fixing a rate at a high level can be frustrating when interest rates start to come down. Similarly, tracker rates can prove expensive when interest rates start to climb to combat inflationary pressure. Which type of loan is preferred by borrowers?
Data provided by the Council of Mortgage Lenders show that fixed rate mortgages account for 70% of all loans taken out in Britain. This demonstrates that homeowners prefer certainty. They remain more popular than tracker deals even when it was clear that interest rates were coming down.
Why Choose Fixed Rate Mortgages?
The world is an uncertain place and increasing numbers of people don't wish to gamble with their finances. They help alleviate market uncertainty by ensuring that the borrower pays a set amount each month, regardless of Bank of England base rate changes.
Fixed rate loans allow easier budgeting and help those of a nervous disposition. If on a fixed income, being able to plan provides peace of mind. Restrictions on overtime and second jobs being so hard to come by add further validity to taking the safe option.
Why Choose Tracker Mortgages?
A tracker deal is the best mortgage for borrowers when it is believed that interest rates are likely to be reduced. It allows borrowers to benefit from Bank of England base rate reductions, leaving more money for other monthly expenses.
Unless a discounted base rate tracker is taken out, it is normally possible to switch to an alternative mortgage deal without paying a hefty redemption penalty. This means that a borrower can easily switch to a fixed rate loan should the interest rate tide turn for the worse.
There is no right or wrong answer when it comes to choosing the best mortgage product. Seek advice from a mortgage broker or use an online price comparison service before opting for a fixed rate mortgage or tracker mortgage as quality advice can help to keep monthly repayments to a minimum.
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