The average two-year tracker mortgage is coming back in vogue, research from moneysupermarket has found, reminding mortgage customers to search the entire market and review all of their options.
The gap in cost between a two year tracker mortgage
and a two year fixed rate mortgage
has widened in favour of a tracker deal which now stands at an average of 5.9 per cent compared to 6.45 per cent for a two year fix.
At the start of June, there was little difference between the two, but now there is a 0.5 per cent gap, making the tracker deal markedly cheaper and increasingly good value, moneysupermarket's 'credit crunch monitor' shows.
The cost of an average tracker mortgage is now at its cheapest level since March this year, offering incentives for mortgage
customers to opt for a tracker rather than a fixed rate.
"In the current environment of uncertainty, it's natural to look to fixed rate deals to provide security but our data clearly shows that it's imperative to look at the whole product range when looking for a new deal." said Louise Cuming, head of mortgages at moneysupermarket.com.
"This is especially so if you can stomach a little leeway on payments. Trackers have been avoided like the plague in recent months due to interest rates looking unstable yet all the signs are that rates will be kept on hold for the time being, with the next movement potentially being a reduction. Some are even predicting rates will go as low as 4 per cent by the end of the year to kickstart the economy, in which case trackers could be a lifeline."
Natwest has tried to sway customers towards a tracker deal with its new fee-free step-down tracker mortgage which charges no legal, set up, or CHAPS fees and becomes cheaper after three years. However, Sean Gardner, director of MoneyExpert.com is wary of the deal, warning customers that the starting rate of the Natwest mortgage is considerably higher than the current average tracker rate.
"Overall the fee-free offer is certainly a move in the right direction," Mr Gardner said, "but borrowers need to consider the total cost of the mortgage and not just the short-term savings available."
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