To fix or not to fix asks moneysupermarket.com
-Tracker mortgages vs fixed rate – which should you go for?
-Base rate expected to stay put this year with possible cuts next year, says Louise Cuming, head of mortgages
With fixed rates on the up and other lenders likely to follow suit if swap rates continue to rise, moneysupermarket.com, the price comparison website, asks if consumers should ditch fixed rates in favour of tracker mortgages.
A number of mortgage lenders have increased their fixed rates recently but with the base rate likely to fall next year, many borrowers may wonder whether now is the right time to arrange a fixed rate mortgage or opt for a tracker mortgage.
Despite lenders raising their fixed rate deals, they are still good value for money as the best two year tracker rate mortgage vs the best two year fixed rate mortgage shows that there is very little between the two. A remortgage for £150,000 with the Bank of Scotland at a 4.49% fixed rate would see monthly payments of £562.74 and £13,904 paid over two years on a true cost basis. A flexible tracker mortgage with the Nationwide at 4.49% would see monthly payments of £563.06 and £13,997 paid over two years – a difference of £93 in favour of the best fixed rate mortgage.
Louise Cuming, head of mortgages at price comparison website moneysupermarket.com said: To fix or not to fix? Many consumers will be asking themselves this question as lenders have been re-pricing their fixed rate deals. Consumers may be wondering if they should wait before ‘tying-in’. However, with a choice of great fixed rate deals under 4.5%, I feel this is still a good time to take your pick. However, if fixed rates continue to get any higher, a tracker mortgage may be a better alternative.
"The Bank of England is likely to hold-fire on a base rate change this year until inflationary pressure dies down so rather than wait for cheaper fixed deals, consumers would be better off shopping around now to find the best mortgage deal that suits their needs.
"While consumers are making their decision, they shouldn’t let their mortgage languish with the SVR. Choosing a good fixed rate is always a better alternative as borrowers can make substantial savings by transferring out of their SVR. With the average SVR at 6.5%, a borrower who opts for a 4.49% fixed rate with Bank of Scotland, a borrower could save £2,997 a year on an interest only mortgage of £150,000."
According to moneysupermarket.com, which uses true cost analysis on all mortgage comparison best buy tables, consumers should look at all costs and special offers over the term, such as arrangement fees, exit fees, valuation fees and cashback, as well as the initial pay rate. moneysupermarket.com’s mortgage comparison channel allows consumers to search products from the whole of market.
Louise Cuming said: "Assessing a mortgage by true cost analysis allows the borrower to see exactly how much they will be paying over the course of that deal. As lenders fight to offer the most attractive deal in this competitive marketplace, lenders are recouping profits instead through additional charges which are not always apparent nor taken into account fully by the borrower."
A mortgage calculator is also available and allows consumers to research mortgage deals for house purchases (including first time buyers), remortgages, buy-to-let mortgages, adverse, payment holiday, self-employed and other specialist purposes. It lists all fixed, flexible, discount and offset mortgages.
moneysupermarket.com is a website where consumers can compare the cost of personal finance products, save money and apply online. The website has more than 25 different channels including mortgages.
