Trackers recommended above fixed-rate mortgages
MoneyExpert.com, the price comparison website, is warning borrowers wanting to switch an uncompetitive fixed-rate mortgage that they are likely to have to pay over £6,000 to end their agreement.
Get-out clauses impose high penalties during the first three years of fixed-rate mortgages, and sometimes such details are buried in the small print so that borrowers are not aware of the restrictions.
Whilst fixed-rate mortgages continue to be attractive to many, John Charcol, the mortgage broker, believes that interest rates for fixed-rate borrowing will creep downwards from now on.
The firm is basing this view on the decision of the Bank of England’s Monetary Policy Committee not to increase the base rate in August.
John Charcol believes that the base rate may have peaked at 5.75% and could start to drop in 2008; if this is correct, some fixed-rate borrowers could be left with expensive mortgages.
In support of this view, the Bank of England’s Monetary Policy Committee has recently stated that the full effects of the base rate rises since August 2006 have yet to be felt in the housing market.
According to the mortgage broker, even if the bank rate does move up another quarter percent, a tracker mortgage will offer better value than a fixed-rate product.
The Bank of England will issue its quarterly inflation report in mid-August and this should give an indication of what increases, if any, could occur this autumn.