Tracker mortgages good bet
If, like the majority of financial pundits, you believe that the chances of an interest rate rise in the near future are remote, then a base-rate tracker mortgage is probably a good bet.
City experts see no prospect of the Bank of England base rate being raised from its record low of 0.5% before the end of 2013 at the earliest. If they are right, and you are currently looking for a mortgage, it seems reasonable to assume that either a base rate tracker or a five year fixed rate deal are the best options. Although you can expect to pay a premium of about 0.75% for the protection of a five year fixed deal as opposed to a tracker, for many, the added peace of mind is well worth the extra.
Existing mortgage holders may be able to improve their financial situation too. Thousands of borrowers saw their repayments increase on 1 May as SVR rises came into effect with the Halifax, the Bank of Ireland and the Clydesdale and Yorkshire Banks. However, if you are on a lender’s SVR rate and have at least 20% equity in your home, it could be worth your while to shop around every six months or so to see whether you can get a better deal by remortgaging. Borrowers on interest-only mortgages, on the other hand, may find themselves trapped as many of the banks have slashed the maximum loan-to-value ratio on their products.