Now is a very busy time for mortgage brokers. As an award-winning Guildford mortgage broker, we’re grateful for that fact that we’re always busy. But this busy is a different type of busy.
As you’re probably aware, the Bank of England increased the base rate to 4.25% last month. Great news for savers. Less great for those on variable mortgages. But with talk of the UK reaching ‘peak inflation’, are tracker mortgages – despite last week’s increase – that bad? Or is it time to fix, particularly as rates seem to be coming down slightly?
And this is what is meant by a different kind of busy; much of our time is being spent weighing up the options based on external factors beyond our control – and that of our clients. There is no clear mortgage product winner right now – it all comes down to individual circumstances.
Equally, this is where professional mortgage advice really comes into its own, and why those applying for a mortgage should really be seeking out guidance from a Surrey mortgage expert.
If you’re currently wondering ‘should I get a tracker or fixed mortgage?’, then you’re not alone. Interestingly, those looking to apply for a tracker mortgage have increased significantly at Complete Mortgages. So, what makes them attractive? Equally, what are their less attractive qualities? Let’s take a look at tracker and fixed rate mortgages.
The pros and cons of tracker mortgages
Tracker mortgages are more flexible than their fixed rate counterparts. There are often no Early Repayment Charges, so you can leave the deal at any time, and there is also no limit placed on how much of your mortgage that you can pay off in a year. For instance, if you had a £100,000 mortgage and inherited £100,000, you could use it to pay off the mortgage immediately. The downside of tracker mortgages, of course, is that if the base rate rises, then so too do your monthly repayments. On the flipside, if the base rate goes down, your monthly repayments do, too.
The pros and cons of fixed rate mortgages
Fixed rate mortgages are good for those who like to know where they are monthly payments-wise. Not so long ago, you could get fixed rate mortgages at 1% – now this was a clear winner for the majority of people. Now, as the cost of borrowing has increased, these deals have become a thing of the past. If you have a budget to work to, then fixed rate mortgages offer than constant you may be seeking. They also cover a long period – typically 2, 3, 5 and 10 years. However, if you had a £100,000 mortgage and inherited £100,000, the chances are you’d only be able to pay 10% – or £10,000 – off in that year, and then another 10% the following year.
Which mortgage should I choose, then?
Sadly, there still is no clear answer – it all depends on your financial circumstances and your appetite for risk, both of which we would be able to establish during an initial consultation.
There are two things to consider, though.
Firstly, experts are predicting that we’ve reached peak inflation – and therefore possibly peak base rate, too. Some experts are also predicting that the base rate will begin to fall again by the end of 2023. If that’s the case, it would suggest that tracker mortgages are at their most expensive right now – and will become cheaper from here on out.
Secondly, it’s important to remember that swap rates dictate the cost of fixed rate mortgages. Our article What are swap rates (and why do they matter)? explains this in more detail.
Get in touch
If that hasn’t helped to shed some light on the current mortgage landscape, then we recommend you get in touch with one of our Guildford mortgage advisers, who will be able to find out more about you and your situation, and help find a mortgage that best suits you.
For award-winning professional mortgage advice, contact our team of mortgage brokers in Guildford on 01483 238280 or e-mail info@complete-mortgages.co.uk.
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