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Tracker mortgages find favour with borrowers

Tracker mortgages find favour with borrowers

Category: Mortgages

Updated: 11/05/2010
First Published: 11/05/2010

MONEYFACTS ARCHIVE
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The proportion of home loan borrowers opting to take a tracker mortgage has overtaken fixed rate products for the first time in a year.

This changing attitude from homebuyers suggests a belief amongst borrowers that the low interest rate environment will continue for some time yet.

The Bank of England yesterday confirmed that the base rate of interest would remain at the historical low of 0.5% for at least another month, with some analysts predicting that the measure will not rise until 2011.

This is driving buyers to take up tracker mortgages, according to Paragon Mortgage, whose research has found that more than half (51%) of brokers' residential mortgage business in the first three months of the year came from these products.

In the last three months of 2009, 45% of respondents' business came from tracker mortgages.

It is the first time since the first quarter of last year that tracker mortgages accounted for more business than their fixed rate mortgage counterparts.

Furthermore, at 43% the proportion of business demanded by fixed rate mortgage was at its lowest since the last three months of 2008.

"The proportion of borrowers opting for tracker mortgages has been growing since last summer as borrowers look to take advantage of low interest rates," John Heron, Paragon Mortgages' managing director, said.

"Although there are some good fixed-rate deals available, the average rate on fixed-rate deals is still significantly higher than the Bank of England's interest rate, and they are becoming less popular with borrowers.

"It also appears that borrowers believe that base rates will remain low for the foreseeable future."

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