Focus on fixed rate products drives down availability of tracker mortgages
According to the Moneyfacts UK Mortgage Trends Treasury Report, tracker rate products have fallen to their lowest number since September 2009. In July 2017, 296 products were available to borrowers; today that number is only 268.
It seems that lenders are already factoring in multiple base rate rises this year. According to Charlotte Nelson, finance expert at Moneyfacts, this can make the tracker market particularly unstable. She says: “In uncertain times providers are more likely to concentrate their efforts on fixed rates rather than trackers, and this is one of the main reasons for the steady decline in tracker deals.”
However, it is not necessarily the lenders driving the change in product availability. Borrowers have one eye on interest rate rises and are more likely to choose a fixed rate deal rather than risk exposing themselves to a potential rise. With reduced demand, lenders will shift their focus to their fixed products to attract and retain customers.
Homeowners could be facing £500 increase in mortgage costs
While the average tracker is still only 2.15%, this week has seen the beginning of a significant shift in the mortgage market with many lenders pulling their top mortgage rates. According to experts, homeowners could be facing a £500 increase in their mortgage bills this year, as the Bank of England has signalled the end of low-interest rates.
Borrowers considering five-year fixed products
Lenders are focusing on their two-year fixed mortgage deals, and currently the best rate available is Santander’s 1.69%, but experts are expecting a surge of borrowers looking for the longer-term security of five-year fixed rates. Whilst five-year fixes tend to be more expensive, TSB is offering five years at 2.34%, so they might be the preferred option. Borrowers fixing into a two-year deal now should be considering whether they like the prospect of having to remortgage not long after the Bank of England has started increasing interest rates.
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