Broker predicts better value in tracker mortgages

Posted 2007-12-17

Tracker mortgages, which carry a variable rate linked to underlying public interest rate typically dictated by the Bank of England, are being touted by some mortgage brokers as being a better value than their fixed-rate counterparts.

According to mortgage broker, John Charcol, they offer better value because borrowers are not left “at the mercy of the lender.” Mr. Charcol proclaimed his confidence in trackers since only a few mortgage lenders lowered rates in keeping with the Bank of England’s recent cut in interest rates. 

Ray Boulger, senior technical manager for John Charcol, has been recommending tracker mortgages for people who wanted a variable mortgage and said those people had “really come into their own.” Adding, “We have seen over the last few years there is always a proportion of lenders who do not move their rate in line with the Bank’s rate and most of the time a tracker mortgage is a quarter of a [percentage point] higher than a fixed rate mortgage, providing the starting point is good.” 

Mr. Boulger further commented that because of the credit squeeze, some lenders had reduced the number of mortgages in their portfolios to lessen the volume of business they were managing. 

He also predicted the availability of trackers would remain strong in 2008, and did not expect lenders to place restrictions on them as base rates fell. However, he also does not believe there will be a significant rise in people switching mortgage lenders in the coming year. 

“The reality of people deciding to look at their mortgage product is based on whether the value of a discount mortgage is cheaper than a tracker mortgage, or vice versa,” said Mr. Boulger.

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