Whereas fixed rate mortgages have been more in demand than tracker mortgages – just because you could save money in interest, manage repayments as you have known beforehand about outgoings – the recent trend in the lending industry has caused borrowers to favor tracker deals.
The average rate for two-year tracker mortgage deals currently stands at 2.02% reduced by .08% compared to last month, which stood at 2.17% in September last year. The Bank of England’s rate has risen to 0.75% and it has been stagnant since last August.
Further research has revealed that a total number of tracker mortgage deals is 203, showing the total increase by 18 compared to the last month. Out of 203 deals, 123 are available for those borrowers who have at least 25% deposit, with rising in 19 deals compared to the last month, and 80 are available for borrowers who have the maximum deposit size up to 20%.
Here is what Moneyfacts says about tracker mortgage rates:
How tracker mortgages can be cheaper with rising in Bank of England’s rate?
The base rate has risen twice: once in November and then in August in 2018 and the Bank of England warns against the frequent rise in interest rates if the economy continues to perform as the bank expects.
Tracker mortgages correlate with the fluctuation in the base rate. The interest rate will go up as the base rate hikes up and the interest rate declines as the base rate fall. Despite the rise in the base rate, tracker deals are much more affordable than two-year or five-year fixed rate mortgages. The average rate for a tracker mortgage is 2.02% while two-year fixed rate mortgage interest rates are average 2.52% and the five-year average rate is 2.94%.
If you had opted for fixed-rate mortgage deals before the base rate soared, you would have dodged paying your repayments at high-interest rates, and if you had opted for a tracker or variable mortgage deals, you would now be paying off much more money each month.
What are exactly cheaper mortgage deals?
Whether you are a first-time buyer or looking to remortgage, you can get the best mortgage deal only when you arrange a large amount of deposit. The higher the deposit, the lower the loan-to-value will be, and the lower the interest rate you will pay. The minimum deposit size cannot help you get the loan at a lower interest rate because the lender is bearing very high risk.
Below is the table demonstrating how the interest rate for a two-year fixed rate mortgage goes down as the loan-to-value decreases:
Below is the table demonstrating the interest rate of a two-year base-rate tracker mortgage deal:
Should you get a tracker mortgage in 2019?
Deciding on the type of mortgage you should choose is a kind of battle. Despite the rise in rates, tracker deals are more affordable than fixed-rate mortgages in the current scenario. However, you should weigh up whether you will be able to manage repayments if the interest rates jacked up. Well, whichever deal you opt, the rule of thumb says that you should have a repayment capacity and a good amount of deposit.