Mortgages

A page about the various types of mortgage available and the advantages and disadvantages of each type.

• Fixed rate mortgages
• Tracker mortgages
• Offset mortgages
• Variable rate mortgages
• Buy to let mortgages

The key question is often whether to buy a fixed or tracker rate mortgage. As at spring 2011 Bank of England base rates remain at 0.5%. Tracker mortgages are typically available at a premium to this of say, 1.75%. Fixed rates for say a 5 year mortgage are being offered at a premium of 4%. In the short term the tracker will be cheaper. Using the percentage rates quoted here a tracker mortgage can be secured for 2.25%. However,  if base rates rise above 2.75% the fixed rate mortgage becomes cheaper.

Fixed rate mortgages have a built in premium to cover the market expectations of future base rate rises. Tracker rate mortgages offer flexibility. They are usually much easier to exit.

Base rates are at historical low levels due to global recessionary conditions and the desire of the Bank of England, bcked by the UK Government, to keep the Pound Sterling competitive for export purposes. In the short term future money market rates rise and fall based on the stream of economic data. Your decision as to whether you go for a fixed or tracker rate mortgage depends on your attitude towards risk. If you want certainty opt for a fixed rate mortgage. If you are happy to gain in the short term but risk losing in the longer term, buy a tracker rate mortgage.