Although fixed rate contractor mortgages have been receiving a lot of attention recently, the interest rate on tracker mortgages has been dropping steadily since the start of the recession.
Back in 2007, the average rate charged on a tracker mortgage was 6.3%. Today you can get one for just 3.55%. Of course, whilst trackers are good deals at present, a lot of borrowers want the security of fixed rate monthly repayments in case interest rates rise.
Nearly 50% of all new mortgages are fixed rate deals and the average rate on a 5 year fix is 5.06%. Although this is over 1.5% higher than a tracker, less than a third of new mortgages are tracker deals.
Borrowers realise that interest rates will not stay at their current historic low forever and are hedging their bets by opting for a fixed rate deal.
The housing market is on a knife edge, according to some estate agents. The Halifax recently informed us that £6,000 has been wiped from the value of an average home due to falling house prices. More than 40% of the UK’s estate agents are now predicting further falls, a rise of 2% compared to last month.
The RICS also expects values to drop as more properties come onto the market. Demand has all but dried up recently and yet there is an increasing supply. Maybe understandably, potential buyers are holding back until we know the results of the government’s comprehensive spending review. But there can be no doubt that it’s definitely a buyer’s market for anybody brave enough to enter into it.
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