Homeowners face difficult rate decision

Tracker rates are comparatively so low at present that many borrowers are signing up for them despite the risk of the base rate rising...

With fixed rate mortgage rates rising by around 0.6% and tracker rates being cut by around 0.3% in June increasingly borrowers are being tempted towards variable deals.

The choice between a fixed and a tracker mortgage is normally made based on expectations of what the base rate is expected to do but when one is so much lower than the other, homeowners are often tempted by the cheaper option.

It is important for borrowers to remember that the base rate can go up as well and as such a tracker mortgage that seems attractive now may rise considerably over the term of your mortgage. If you can afford a fixed rate mortgage at current levels then you are cushioned from any rise in the cost of borrowing that could make a tracker a real strain on your budget.

Ultimately, the decision should be made based on the long term affordability of the repayments but with money market rates on the rise it would appear as if fixed rates could rise further so now may be the time to snap up current deals whilst they last.

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