Mortgages Uncovered

The Council of Mortgage Lenders (CML) states that tracker mortgages are on the increase as first time buyers are encouraged by the recent interest rate cuts in the last couple of months from the Bank of England.

“In the normal course of things, first-time buyers have tended to be more attracted to fixed-rate mortgages recently than variable-rate mortgages,” said CML spokesperson Sue Anderson.

Tracker mortgages go up and down in line with the Bank of England interest rates, so these allow borrowers to take advantage of any decreases.  However, the downside is that borrowers will also feel the effect of any increases.  Those who take out tracker mortgages have to be fairly confident that they can afford the increases and preferably, while interest rates are relatively low, such as now, it can be well advised to put a little extra aside to compensate for if the interest rates increase.

If you want absolute certainty in what you should pay each month then a tracker mortgage is not for you.  It can depend on your attitude to risk.  A reasonable alternative, somewhere in between a fixed rate and a tracker rate, would be a capped or a cap and collar mortgage, such as we talked about in an article a few weeks ago.