Tracker Mortgage Compared to Fixed-Rate Mortgage

Posted 2007-12-17

Online mortgage brokerage firm John Charcol believes borrowers will find more value in tracker mortgages than in fixed-rate mortgages.

The firm has expressed its confidence in tracker mortgages because they do not “leave borrowers at the mercy of the lender.” Very few lenders reduced their rates in line with the most recent cut in interest rates by the Bank of England. 

Trackers are becoming more attractive for people who want a variable rate, according to Ray Boulger, senior technical manager for John Charcol. 

He explained that many banks do not change their rates in response to the Bank’s rate. The interest on a tracker mortgage, however, will usually be one-quarter of one percent above a fixed-rate, given a good starting point. 

The credit crunch is forcing many lenders to reduce the mortgages in their portfolios to reduce exposure. 

Boulger expects tracker mortgages will continue to be available in the new year. He says lenders probably will not limit them in light of falling base rates. 

Boulger does not expect an increased number of borrowers to change mortgages in 2008. He expects people to make decisions about their mortgage depending on which is cheaper, a discount mortgage or a tracker mortgage.

Leave a Reply