by Mark Johnston
If analysts are right, tracker and variable mortgages are set to be the best value for money mortgages in the next few years.
An independent economic forecasting group linked to the accounting firm Ernst and Young is predicting that the Bank of England based rate is set set to remain at its record low of 0.5% until the end of 2013.
Many believe that retail energy prices and the increase of VAT from 17.5% to 20% in January 2010 will keep inflation above target for the next year or so but as these measures wear off it will drop well below the 2% figure.
To stop inflation dropping below 1% the Monetary Committee would need to keep the Bank of England base rate at the current 0.5% for much longer than what’s been predicted previously. Many analysts now see a sustained 0.5% figure as the norm.
The groups report does put emphasis on the new coalition Governments ability to deliver on the planned spending cuts.
This news is already filtering through into the UK mortgage market with many mortgage brokers pushing tracker mortgages as they are showing the cheapest longer term options.
David Hollingworth of London & Country Mortgage Brokers, says “trackers continue to offer lower initial payments than a corresponding fixed-rate so those comfortable with the forecasts should secure an attractive tracker margin to capitalise”
First Direct, the telephone bank arm of banking giant HSBC is offering a lifetime tracker at 1.79% plus base rate which current makes the deal a very competitive 2.29%. The deal currently requires a 35% deposit as it has a 65% loan to value (LTV) with one of the cheapest fees at £99.
The Dutch financial group ING is offering a 75% loan to value (LTV) mortgage at 2.65% which is made up of the current 0.5% base rate plus 2.15% but has a higher fee of £945.
Its also worthwhile looking to pay off a higher repayment whilst rates are so low. Mortgagerates.org.uk highlighted this in mortgage news. The more borrowers pay off today the more they will save in the future.
“Using the current low interest rates to help reduce the mortgage more quickly will stand borrowers in good stead for when rates do climb,” explains David Hollingworth of London & Country Mortgage Brokers.
Its always worth using spare income to pay off a more of your mortgage but remember that base can increase and pay rise quickly overtime so make sure that you can afford your monthly payments in the event of increases.
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