Fixed or tracker? Advice for indecisive remortgagers

Monday, 04 February 2008 12:00

Remortgagers awaiting the Bank of England's next interest rate decision on Thursday before choosing a deal could benefit by waiting a bit longer.

With a rate fall on the cards many borrowers might be tempted to move to a tracker mortgage. But the safety of a fixed-rate deal, should interest rates go up, makes this option far more appealing, creating a conundrum for even the most savvy of remortgagers.

However, Stroud & Swindon Building Society said there might be more sense in waiting until the Bank of England has made several more interest rate cuts and then buying a fixed-deal.

Paul Chafer, commercial director at Stroud and Swindon, said: "Unlike fixed-rate mortgages, trackers don't necessarily tie you in for a long period of time.

"With interest rates expected to go down before they rise, it may make more sense to wait until they reach a point at which you are comfortable, and then arrange a fixed-rate mortgage."

For those opting to take immediate advantage of potential 0.25 per cent fall in rates, Mr Chafer said it was important they realised the difference between discounted and tracker mortgage rates.

"Trackers will follow the Bank of England base rate by a given margin, whereas discounted mortgages can be a discount off the mortgage lender's standard variable rate," he said.

But he added a note of caution. "Borrowers should beware, the mortgage lender's variable rate will not necessarily follow a reduction in the base rate, as we have seen in recent months."

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