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Mortgage borrowers seeking best of both worlds

Mortgage borrowers seeking best of both worlds

Category: Mortgages

Updated: 17/12/2012
First Published: 18/01/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Mortgage borrowers are increasingly opting for the best of both worlds when faced with the decision over whether to fix their rate or not.

More than half (55%) of borrowers in December continued to favour tracker mortgage, while around a third (34%) opted for fixed rate mortgages, according to the latest data from John Charcol.

However, increasingly coming to fore, and enjoying its strongest month yet in terms of popularity, was the track and fix hybrid mortgage, with one in ten (10%) borrowers deciding to take the plunge.

Hybrid mortgages tend to be longer term deals which offer a blend of both tracker and fixed rates.

One such deal, available through Accord, lets borrowers track the base rate for the first two years of the mortgage, before a fixed rate kicks in for the final three years of the five year product.

Simon Collins, technical manager at John Charcol, said borrowers have been reluctant to take longer term fixed rates when they know that variable rates are likely to remain low for the next couple of years at least.

"Yet at the same time they are anxious over longer term payment security, knowing that in two years' time, fixed rates may well be significantly higher," he adds.

"The hybrid is therefore the perfect product for those borrowers who want to take advantage of low variable rates now, while securing a fixed rate element at today's historic low prices.

"Everyone knows that the bank rate will increase at some point, but the big question is when and how fast?"

At the moment, the deal from Accord is the only hybrid currently on offer, with interested borrowers having to approach the lender through a mortgage broker.

However, with the housing market treading water, and many high street lenders not straying far from traditional two year products, Simon Collins says it would be fantastic to see other lenders take up the mantle started by this novel product.

"It is ideal for first time buyers who want to take advantage of low pay rates now, but also have longer term security built in, and more widespread availability from lenders would almost certainly stimulate that end of the market," he added.

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