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With most tracker rate mortgages following the Bank of England base rate, it's probably not surprising to find that the average rate on these mortgages has increased since base rate rose to 0.50% last November. However, the forthcoming Moneyfacts UK Mortgage Trends Treasury Report reveals that availability has also been negatively impacted.
The number of tracker rate mortgages has decreased by so much, in fact, that it has now reached the lowest number seen since September 2009, at 268. Charlotte Nelson, finance expert at Moneyfacts, points out that "the number of tracker rate mortgages on the market has been in steady decline for some time." This is illustrated in the table below, which also shows the recent increase in average rates.
|Tracker rate mortgages||Sep-09||Feb-17||Nov-17||Feb-18|
|Number of products||255||294||274||268|
Source: Moneyfacts Treasury Reports
"Back in 2009, providers were unsure of how to price their variable products and opted instead to withdraw them entirely," Charlotte recalls. "A similar scenario appears to have occurred this time around, with providers questioning how to price their deals, particularly with talks of further base rate rises this year."
Indeed, while last week saw the Bank of England Monetary Policy Committee vote unanimously to keep base rate the same, there's every expectation that more increases are coming, and potentially for larger amounts.
Supporting this speculation are rising SWAP rates. Charlotte says: "The two-year SWAP rate has increased by 0.15% in just one month, which is particularly significant, as this was an early sign of the base rate rise that occurred last November.
"The fact that the markets are already starting to factor in multiple base rate rises makes the tracker rate market particularly unstable. In uncertain times providers are more likely to concentrate their efforts on fixed rates rather than trackers, and this is one of the main reasons for the steady decline in tracker deals."
Anyone currently on a tracker rate mortgage might therefore want to consider switching to something more secure. Fixed rate mortgages may come with higher rates than variable mortgages, but in return for this sacrifice they offer repayment security for a set time.
Whichever is more suitable will depend not just on the market, but also your personal circumstances and attitude towards risk. However, if you haven't reached the end of your current mortgage deal yet, make sure to check whether remortgaging is worth any early repayment charge you may need to pay.
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