Interest rates are likely to remain low until the end of next year
The Bank of England Governor Mervyn King said recently that “interest rates are likely to remain low until the end of next year”, in a bid to help the UK economy deal with the global economic downturn, which could mean that more homeowners will consider opting for tracker deals.
Despite margins increasing in recent years, tracker deals, where the mortgage rate mirrors any movement in the base rate, are still viewed by some market commentators as better value than fixed-rates.
Trackers usually follow Bank of England base rate, though some follow the lenders own base rate. If you take the view the base rate will only go up slowly, opting for a two-year fixed-rate may make little sense.
However, if you want to have the facility to switch to a fixed-rate as soon as the base rate rises, lifetime trackers may be an option to consider as some allow you to switch to a fixed-rate as soon as the base rate begins to rise, although it is important to check for any Early Repayment Charges.
It would appear that some homeowners are not letting the low-rate opportunity pass them by, according to the Co-operative, they have seen a 56 per cent year-on-year increase in the number of customers making mortgage overpayments.
The organisation said that customers on variable rate mortgages make up the bulk of those repaying more than they have to, with this group three times as likely to be making overpayments, than their fixed-rate product counterparts.
Borrowers on lifetime tracker products and standard variable rates do not have any restrictions on overpayments and the majority of those within their initial mortgage deal period can get ahead up to 10 per cent of their loan balance annually without being penalised.
