Fixed or tracker rate – The big mortgage broker and client debate … Over the years, both mortgage brokers and clients have been very channelled towards longer term fixed rate deals as they have been at a record artificial low. However October saw mortgage rates surge as lenders panicked, pulled and priced higher in the face of market volatility. This was mainly due to an increase in Swap rates – what lenders pay to financial institutions to acquire fixed funding for a set period of time.
But with Swap rates now stabilising this is finally filtering through to the lenders and fixed mortgage rates are now dropping back down from recent highs. Leaving a big debate at present – should a mortgage adviser be advising people to opt for the security of a fixed rate or a cheaper tracker or similar variable rate mortgage? The brief answer to this question really depends on the individual clients situation and attitude to risk.
If you are completely risk averse then perhaps a fixed is the route for you – but fixed rates are still some way above the trackers available. For those that need to move now or are coming off their fixed rates in the near future and need to remortgage, a tracker offers a considerably lower rate than a fixed at the moment.
Tracker mortgages are not without risk as they move in line with the Bank Of England base rate, however there are a number of tracker products available without any exit or lender arrangement fees. This will enable you to switch to a fixed rate without it costing you anything at all. There are also several lenders offering a very accommodating ‘Switch to Fix’ option which allows a customer to switch to an existing customer fixed rate, within the same product range, at any time without incurring any early repayment charges. This flexibility will allow clients to take advantage of current lower tracker rates for a period of time and then switch to a fixed rate once they have dropped a bit more or if Bank Of England continues to rise to a uncompetitive rate.
There is also the option for Be Mortgages to make a mortgage application for an initial rate and reassess the situation closer to completion – if there is a cheaper rate option available we will apply for the new rate on your behalf.
Always secure professional mortgage advice from a good proactive, independent, whole of market mortgage broker like Be Mortgages.