We are getting asked by many of our clients whether they should opt for a fixed rate or a tracker mortgage. So, in our December Mortgage Rates Update, Adam Nanson looks in detail at what is happening with Mortgage Rates at the moment. And, what are the pros and cons of fixed rate mortgages versus tracker mortgages.
“Following the mini budget from Liz Truss in September, mortgage rates have spiked to higher than they have been for years. They have started to come back down again and the market has started to stabilise. In fact, The average of the lowest fixed rate mortgages has now dropped by more than 0.50% since the beginning of November.
“Even with rates starting to fall, many clients are asking me whether they would be better off opting for a tracker mortgage rather than fixing while rates are still high. So in this article, we talk about each type of mortgage to help you assess which might be suited to your circumstances.
What is the difference between a fixed rate and a tracker mortgage?
“Given the financial climate, it’s wise to find out more about the differences between a fixed-rate mortgage and tracker if you’re considering which might be the best for you.
- Fixed rate mortgage – you take out a mortgage with a guaranteed rate for a specific period of time. This can be 2, 5 or even 10 years.
- Tracker mortgage – usually tracks the Bank of England’s base rate, which can go up, down or remain the same. The lender you choose will then set their own rates based on this, and you’ll generally pay a set percentage of interest on top of the base rate.
If you speak to a mortgage adviser like Your Mortgage Expert, they will fully explain the difference between these types of mortgages.
Should I opt for a fixed rate or a tracker mortgage?
“Most people are finding that mortgage rates are higher now than they were the last time they reviewed their mortgage. This is due to the Bank of England Base rate being higher now than it has been for several years.
“In many cases, at the moment, tracker mortgages have lower rates than fixed rate mortgages. This is because lenders are being very careful with fixed rate deals right now.
“It is worth remembering though that, with tracker mortgages, the rate you pay can go up and down. So, if the Bank of England base rate increases, so will the amount you pay each month. However, if the base rate does peak and then starts to fall, a tracker will allow clients to take advantage of falling rates.
“On the flipside, with fixed rate mortgages, you pay the same for the duration of your mortgage term. This brings certainty to the amount you will pay each month, which many people value. Especially with uncertainty around other bills such as gas, electric and food costs.
“Much depends on your appetite to risk and what you can afford to absorb in your monthly budget. We would advise you speak to a mortgage adviser like us to fully review your circumstances and decide what is suited to your circumstances.”
If you have any questions after reading the December mortgage rate update, please get in touch. We don’t charge anything up front, so by speaking to us, you are under no obligation. We are based in Salisbury, Wiltshire, but we can help you no matter where you live in the UK.
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