Remortgaging to a base rate tracker could be a good choice
May 23, 2008
According to some industry professionals remortgaging to a base rate tracker mortgage could be a good choice for many homeowners, as this will enable them to benefit from the series of interest rate cuts that are expected to be applied by the Bank of England next year. Over the past year and a half there have been five interest rate rises, and this has seen the base rate rocket from 4.5% in August 2006 to 5.75% by July of this year. In December, however, interest rates finally fell by 0.25%, taking the base rate to 5.5%.
Whilst interest rates were on the rise many homeowners and new property purchasers flocked to take out fixed rate mortgages so that they would not be affected by further interest rate rises. However, the popularity of fixed rate deals started to wane as more and more people realised that interest rates may have peaked. Experts are now predicting that the Bank of England will reduce rates another two or three times over the coming year.
In light of this prediction many experts are urging homeowners and property purchasers to consider whether a base rate tracker mortgage may be the best choice, as this mortgage actually tracks any fluctuations in the base rate so consumers will benefit from any further reductions – although any future rises will also affect repayments. However, those that remain on fixed rates could soon find that they are paying way over the odds, particularly if they took out the fixed rate fairly recently whilst interest rate were quite high.
In the meantime, a number of lenders have not passed on the most recent base rate reduction to mortgage payers, although several major lenders did announce that they would be passing on the full 0.25% right away following the Bank of England’s announcement.
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