Borrowers 'should not be seduced' by trackers

Monday, 29 June 2009 12:00

Tracker mortgages may look tempting now but could be costly in the long-term, experts warn.

A borrower with a £300,000 tracker mortgage would pay £100 a month more on an average two-year fixed-rate deal, according to moneysupermarket.com, making trackers look a more attractive prospect.

But a base rate increase of one per cent would reverse the situation, the price comparison site warned, and with many analysts expecting base rate rises later this year or at the start of 2010, tracker customers could be caught out.

Louise Cuming, head of mortgages at moneysupermarket, said: "Borrowers should not be seduced by the opportunity to make short term savings by opting for a tracker mortgage deal.

"They must take the expected base rate rises into consideration right from the start, and make sure that they can still afford repayments when the Bank of England begins to reverse the cuts.

"Anyone thinking about fixing must act quickly. Lenders are increasing rates on an almost daily basis and there is a strong feeling that we have now passed the bottom of the mortgage market."

If rates increase by two per cent, then the payments would rise by £76 or £152 on mortgages of £150,000 and £300,000 respectively. And if the base rate goes back to the level it was in October 2008 (4.5 per cent) then the increases will be a costly £260 or £520 per month respectively, moneysupermarket said.

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