Fixed-rate home loans may be in mode, but with a reduction
in rates imminent it would be advisable to consider the
tracker option instead. Fixed-rate mortgages have been very
popular in recently but with all the talk about interest
rate cuts, a tracker mortgage could be the way to go.
Even though interest rates were kept on hold last month,
there are indications that the short and long term trend is
downward. A tracker mortgage would be a sensible option as
it follows the movements of the Bank Of England base rate.
According to the Council of Mortgage Lenders, fixed rate
mortgages reached a peak in August 2007 and they accounted
for almost 80% of all mortgages taken out in the UK.
Fixed rate mortgages appeal to those who want to know
exactly how much their repayments will be each and every
month and are an attractive option in circumstances where
there is an upward trend in the interest rates. However,
most experts now agree that the interest trend will be
downward therefore the tracker mortgage will be the most
appealing as many will worry about fixing an interest rate
at the peak of it's cycle.
A tracker mortgage is named in this way since it tracks the
movements of the base interest rate from the Bank Of
England. In effect it calculates the mortgage repayment
based on the base rate of the day and adds a fixed
percentage to this rate. So as interest rates fluctuate the
mortgage payments move accordingly. This could be deemed an
ideal mortgage when the trend of interest is downward.
Since, when the Bank Of England rate falls the mortgage
payment also falls. The amount that is charged over the
base rate will vary from lender to lender.
With tracker mortgages you can choose to have a fixed
period, such as two or three years, where the mortgage
interest rate will track the Bank of England base rate.
Once this period had expired the mortgage will revert back
to the standard variable interest rate charged by the
lender.
With this kind of mortgage there are the options to revert
to a tracker for a fixed period which is usually 2 or 3
years. During this period the mortgage repayment will be
based upon the base rate from the Bank Of England. After
the agreed tracker rate period expires then the mortgage
will revert to the standard variable rate. The advantage of
choosing this product during a period of interest rate cuts
is that your repayments will decrease during this period
and after the expiry date you can review your options again.
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Graham Bradlington is the marketing manager for Quickly
Finance Limited, a company which specialise in Fast track
Secured Loan & Remortgage applications for homeowners.
Quickly Finance is 100% independent & can search the whole
market for the best deals... quickly! For more info:
http://www.quicklyfinance.com
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