A tracker or a fixed rate mortgage - which should you chose?
Funding costs are falling and so are mortgage rates, home-owners are now wondering whether a fixed rate mortgage offers better value than a variable rate mortgage.
Lending costs have significantly dropped for UK mortgage providers and cheaper wholesale funding is leading to cheaper UK mortgage rates.
Rates began to increase in May starting with SVRs, but more recently the trend has started to reverse meaning that there are some competitive deals presently on offer.
With falling rates the question most home-owners looking to remortgage want answered is which deal offers the best overall value, is it a variable or fixed rate mortgage? Many are turning to independent experts for help in working out the answer to this question.
An independent broker such as Deal Direct can help you work out which product best suits your individual financial needs.
Fixed rate mortgages are set by swap rates and swaps dropped by 0.36% to 1.04% in June, tracker mortgages are set by the Libor which fell by 0.25% at a similar time.
Now lenders have access to cheaper mortgage funding they are able to cut their rates, but it is still true that the very lowest rates are reserved for high deposit borrowers. The lowest 5 year fixed rate mortgage might be on offer through NatWest at 2.95% but only for those with a deposit of 40% or more.
If you are fortunate to have a significant deposit then there are competitive longer term fixed rates and lifetime trackers available.
NatWest and Santander both offer a 5 year fix for up to 60% LTV at under 3% and HSBC has a lifetime tracker for up to 60% LTV at 2.64%.
Whether choosing a longer term fixed rate mortgage or lifetime tracker, it is vital to make sure you have no early repayment clause attached which would mean you would incur penalties if you sold your home and moved before the end of the deal.
Contact a Deal Direct adviser today and we can help you to work out which type of mortgage suits you best.
Call one of our advisers for advice and a quote.
