Make tracks to escape from fixed-rate mortgages

Make tracks to escape from fixed-rate mortgages

The cost of fixed-rate mortgages has been coming down in recent weeks, but trackers still offer the cheapest deal for those who can afford to risk their repayment going up and down.

After the Bank of England decided to leave interest rates on hold last week, experts are predicting that rates may have reached their peak.

'The risk that the monetary policy committee may push rates up to 6 per cent or beyond over the next few months has now receded in light of the ongoing global turmoil in financial markets,' says Richard Dingwall-Smith, chief economist at Scottish Widows Investment Partnership.

And the more it appears that we are at the top of the interest-rate cycle, the less reason there is to buy a fixed-rate mortgage, says Ray Boulger of mortgage brokers John Charcol.

Boulger recommends a two-year tracker from the Halifax at 0.36 per cent under base rate (giving a rate of 5.39 per cent), though it comes with a £1,499 fee.

Meanwhile, the Nationwide building society last week warned borrowers who are coming to the end of a cheap two-year fixed-rate deal to remortgage or face soaring repayments.

It estimates that more than 250,000 borrowers will see their two-year fixed-rate mortgage mature between October and December and are likely to see their average monthly payments increase by about £200 a month unless they switch from their lenders' standard variable rate.

The best buy two-year fix in 2005 was from the Portman.....continued below

Advertisement starts

---

---

Advertisement ends

at 4.2 per cent. Borrowers coming to the end of this deal will now be customers of the Nationwide, since the two lenders have merged. The best two-year fix they could get with the Nationwide is 5.98 per cent with an £899 arrangement fee, which would see their repayments on a £150,000 interest-only loan increase by £222.50 a month from two years ago.

James Cotton at mortgage brokers London & Country points out that they could save £30 a month over the Nationwide rate by remortgaging to a two-year fix from First Active at 5.75 per cent with a £999 fee.

Guardian Unlimited © Guardian Newspapers Limited 2007