Tracker mortgages take 80% of sales

Tracker mortgages take 80% of sales

21 January 2010 / by Rachael Stiles

Tracker rate mortgages accounted for 80 per cent of mortgages taken out in December at mortgage broker John Charcol.

Meanwhile, the popularity of fixed rate mortgages has continued to plummet; the John Charcol Index shows that they represented less than 20 per cent of mortgages in the last month of 2009, falling below this figure for the first time since August 2008.

Mortgage customers are being lured away from fixed rate deals towards tracker mortgages by a static base rate, which the Bank of England once again voted to keep at 0.5 per cent this month.

Ray Boulger, spokesperson for John Charcol, encourages borrowers to choose a tracker mortgage as he believes that they currently offer the best value.

"Whilst the split between variable and fixed, at face value, seems dramatic, it is really no surprise as it is absolutely our belief that the best value lies in tracker rates at present," he said.

Even if the Bank of England does raise the base rate, it would have to rise by about 1.5 per cent to erode the savings to be made with a tracker deal, he explained, as this is currently the average difference in rate between tracker and fixed rate mortgages.

Mr Boulger reassured tracker mortgage customers, and potential borrowers who are considering their options, that "it will currently take a substantial rise in bank rate for a borrower who takes a tracker to be worse off than one who opts for a fixed rate."

While fixed rates offer the obvious attraction of security that monthly repayments will not suddenly rise, Mr Boulger urges fixed rate mortgage devotees to question how much their need for this security it worth, as they could be paying over the odds for it.

"Generic advice on whether to take a fixed often simplistically states that if you cannot afford a rise in rates then you should take a fixed rate. If rates for both fixed and variable are at the same level then clearly that is a no-brainer, but when there is a gap as wide as in today's market being generic can easily be misleading," he said.

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