Tracker mortgages are continuing to gain ground in the mortgage market, increasingly making a dent in the fixed rate share, according to sales figures from Mortgageforce.
As the base rate remains at its record low and is not expected to increase for several more months, a growing number of borrowers are opting for a tracker mortgage, which are proving more attractive than the reliability of fixed rate deals.
The website's figures show that 29 per cent of all mortgages for purchase and remortgages taken out in November were fixed rate mortgages, falling from 34 per cent in October.
The tables have turned since the beginning of 2009, when fixed rate mortgages were representative of 75 per cent of mortgages for purchase and remortgage lending. Since then, they have been in steady decline as savvy borrowers looked to cash in on falling interest rates.
Katie Tucker, technical manager at Mortgageforce, warns that despite interest rates remainin static since March at 0.5 per cent, borrowers should not be lulled into a false sense of security, as they will not stay low forever. "The choice between a fixed rate and a variable rate is more personal now than ever; the advantage in the price difference is cancelled out by the likelihood of Bank rate being increased in the next two years," she said.
The decision of which mortgage to choose should not be based on rate alone, she stressed, but on whole of market advice, and the borrower's own ability to afford and cope with any potential increases in the interest rate they pay over the term of the mortgage.
Tracker mortgage customers need to be aware that this type of loan presents them with an opportunity to overpay on their mortgage while interest rates are low, or to enjoy lower monthly payments for a short time.
"A tracker is not for you if you suspect you're not disciplined enough to overpay in the short term while your contracted payments are low, or if you would struggle if your monthly payment increased by about another quarter in a year's time," Ms Tucker said, assuming a one per cent rise on a current four per cent rate on an interest-only mortgage.
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