Tracker mortgages in vogue during July

07 August 2009 / by Rachael Stiles

July saw 37 per cent of borrowers opt for a tracker mortgage, compared to 25 per cent the previous month, according to figures from national broker Mortgageforce.

Tracker mortgages were more attractive in July, following a maelstrom of applications for fixed rate mortgages in June, when homeowners seeking security accounted for 75 per cent of applicants.

However, fixed rate mortgages attracted an "unusually low" 63 per cent of borrowers in July, Mortgageforce's data shows, as experts predict interest rates will remain at a record low for the rest of the year.

Indeed, the Bank of England announced yesterday that the base rate will remain at 0.5 per cent for another month, where it has stood since March when it was cut from one per cent.

Commenting on the results, Katie Tucker, technical manager at Mortgageforce, said: "It shows that borrowers are fickle in their favour, and a low enough pay rate can turn heads."

Ms Tucker said that lenders tempted borrowers in July by offering competitive new mortgage deals, largely as a result of the rush to fixed rate mortgages in June, in order to bring about balance between their fixed and variable rate lending. 

But, borrowers are not being duped by the lure of static interest rates at record lows, because some lenders are offering mortgages without charges for early repayment, offering customers the freedom to switch if the base rate starts to move.

"The best deals at the moment have little or no Early Repayment Charges," Ms Tucker said, "because they give the flexibility of remortgaging away in the next year or so, if increasing Bank Rate does cause their payments to go up, and they want to switch to fixed rate."

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