Now that we have the base rate at an all time low, is it a good time to look fixed rate mortgage deals? You will be forgiven for thinking that because rates are next to zero, then now is a good time to fix a mortgage. But be cautious of doing this and take a mortgage broker’s advice before you try to compare mortgage rates on your own!
Yes, the bank’s lending rate is the lowest ever, but at the time of writing, the banks have not said if they will reduce their costs of borrowing. If they do, it will be the variable rates that will be changed – the rate they charge to customers that are not on special deals. This will also affect capped rates and discounted mortgages.
But the lenders are not soft. They know that with base rates at an all time low, rates are more than likely to climb back up in the future – especially over the duration of a 25-year mortgage. They will be contemplating whether they think the central banks will maintain the low levels for a few months, decrease them further or start to raise them back up later in the year.
If they think there is any risk of base rate rises in the next year, then they are not going to tie their own hands by offering low rate fixed mortgages for 2, 3 or even 5 years. Instead, they will offer cheap looking fixed rates that switch to the variable rate at the end of 2009 . Or they will add a a small amount onto the rate and let it run into 2010.
So who of the millions of mortgage payers are probably benefiting at the moment from the low base rate? Well the 30% on fixed rates probably are not – their fixed rates have stayed unchanged. Variable rates, including discounted and capped rates, might have benefited, but with reports that only 19 of the 90 lenders passed on December’s cut fully, there’s a good chance that those on variable rates aren’t seeing great reductions either.
The borrowers seeing reductions at the moment is supposed to be those on tracker products, but even some of these have floors built into them, meaning that if the central bank’s base rate drops below a given percentage they don’t have to keep following it, whilst other lenders have increased the amount above the base rate their new tracker mortgages track.
Are trackers the way forward and you should try to compare top mortgage rates for these? Well with capped floors and an increasing gulf between base rate and rate charged, plus no doubt base rates will climb over the following few of years, it is anyone’s guess what is best. It all relies on your financial situation and outlook. Are you happy to take the risk of a low rate with trackers, but can afford to pay if they do go up? Do you need to budget carefully with a fixed rate mortgage so that you know what you will be spending? You really need to speak to a financial advisor who can advise you.
Find out to save finances on the auto loans. If you know how to use auto loan calculator, you can save lots of money.
- Reason Behind Why Why You Should Decide On A Fixed Interest Rate Remortgage In the event that you’re thinking about the possibility...
- Variable Rate Mortgages in UK We have already seen how one can find mortgage that...
- How Acquire the Greatest Rate from Refinance Mortgage Loan If you have already taken out a mortgage loan that...
- Refinance Mortgage Rate: Possessing Your Dream House with the Help of this Plan The best option opened out to you if your monthly...
- Variable Rate Mortgages Described There are numerous kinds of Variable Rate mortgages and...