Young homebuyers urged "do not gamble" on rates

Confused remortgagers weighing up the pros and cons of fixed and tracker products should consider their risk threshold when choosing a deal.

That is the advice being issued by mortgage experts at Moneysupermarket.com which has noticed young homeowners are opting for the peace of mind of fixed rates, which are not affected by interest rates.

Yet there it has noticed a growing number of daring remortgagers who are more willing to take a gamble, usually those who know they can afford to pay a higher amount if interest rates go up, who have been opting for tracker rates.

According to the financial comparison website's figures, tracker mortgages have grown in popularity recently, accounting for 24 per cent of the mortgage market – a high not seen since 2005. This has been fuelled by recent interest rate cuts and predictions of further downward drops.

Louise Cuming, head of mortgages at Moneysupermarket, said: "This shows that, for those who aren't too worried about affordability, the trend appears to be [to expect] rates to go down."

But for the first-time buyers and those who are new to the mortgage market and do not have such stretchable incomes, fixed-rates are the far better bet.

Ms Cuming said: "They won't be thinking 'let's gamble on a tracker because rates might go down'. They think 'I can only afford £1,000 a month, if rates go up, I will be stuck'. So that's the main factor that drives people to fixed rates.

"For people at the maximum of their affordability I would never suggest they take a gamble on rates. None of us have got a crystal ball - who would have predicted what happened last year?

"So, if you're at the edge of your affordability, then I would go for a fixed rate."