More than 100,000 home owners’ current mortgage term will expire before the end of the year. When their current deals ends, they will be transferred to standard variable rates which are a lot less attractive than they are on at the moment. A lot of these borrowers are obviously already shopping around for an alternative deal.
Many people are now opting for fixed rate mortgages due to the historically low base interest rate. But there is another option that could be worth exploring, according to some experts.
Tracker mortgages used to be available on a short-term basis; usually between 2 and 5 years. However, the major banks are now offering a new tracker product that lasts for the length of the loan.
HSBC and sister company First Direct are currently the largest provider of these loans, but other institutions such as the post office, ING direct and Barclays Woolwich have launched their own life time trackers.
A life time tracker is not suitable for everyone. The best deals are only available to people with huge deposits or existing home equity. They are therefore most suited to borrowers who already have a contractor mortgage and have paid off a reasonable amount of their debt.
The best tracker from HSBC is 1.69% over base making the current rate 2.19%. It has an application fee of just £99 but the LTV is 40%.
Of course, the problem with trackers is that they are dependant on the Bank of England’s base rate. As soon as that rises, so will the monthly repayments. But the base rate would have to rise by between 3.5 and 4.5% to make them more expensive than current fixed rate products. And an added bonus of life time trackers is they normally don’t include early redemption fees so it’s still possible to fix at a later date.
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