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Fixed Rate, Tracker or SVR?
Many borrowers whose current mortgage deal is coming to an end over the next few months are now considering which mortgage to take out next.
Tracker mortgages, which were increasingly popular in 2008, still offer a good deal but with interest rates now so low, the best tracker rates have long since gone from the market and many of the existing deals have a collar on them. That means that even if interest rates are reduced again, those on a tracker rate won't benefit from the interest rate cut.
Fixed rate mortgages provide borrowers with the certainty of a fixed monthly payment. However, they don't move down with interest rates but correspondingly, if interests rates are rising, then the monthly payments are also unaffected.
Standard variable rate (SVR) mortgages go up and down according to interest rates but most do not have early redemption charges (as in the case of tracker and fixed rate mortgages) so if borrowers did want to move to a better deal then they can do so without paying a penalty.
Tony Rice, of Bedfordshire-based specialist mortgage broker TMP Mortgage Zone, said: "Most analysts are predicting that interest rates will remain low or fall further in the short term. That would indicate that over the short term a tracker or SVR might be the best option for some borrowers. However, at some point they will rise again and when they do the existing fixed rate deals currently available will likely be withdrawn to be replaced by fixed rate deals at higher interest rates. No-one knows when or how fast interest rates will change of course so choosing the best new mortgage deal for you means not just considering your financial circumstances today, but also taking into account how they might change in 2, 3 or 5 years time."
As a whole of market broker, TMP Mortgage Zone provides access to thousands of mortgages from all the well-known high street and specialist lenders. Clients are provided with information on a range of mortgages that are suitable to their existing financial circumstances and should remain affordable for the duration of the mortgage.
[ 13-02-2009 ]
