“Savvy” borrowers are avoiding locking in to long-term deals and instead turning to tracker mortgages, brokers have found.
It follows recent instability in the mortgage market resulting from the conflict in the Middle East.
Consequently, mortgage brokers have suggested utilising a tracker mortgage before switching onto a fixed rate once they decrease and stabilise.
“At the time of writing, Co-operative Bank offers a 4.34 per cent tracker at 60 per cent LTV and 4.64 per cent at 70 per cent LTV, both featuring no early repayment charges,” The Mortgage Geezer founder, Darryl Dhoffer, said.
“Barclays follows closely at 4.75 per cent (70 per cent LTV), also with no ERC.”
He added that, for customers with a larger deposit, “no-fee-to-exit” trackers are powerful tools for flexibility but, for customers with smaller deposits, it may be beneficial to wait out the current volatility with a shorter two-year fix.
Similarly, Compton Financial Services director, Martin Rayner, said that locking into a high fixed-rate now could be a mistake amid the current chaotic environment.
“Some borrowers are using trackers as a short-term strategy, planning to switch to a fixed-rate if rates fall,” he detailed.
“This can work well, particularly with a no early repayment charge deal, as it allows you to move without penalty.
“The downside is you remain exposed to further increases.”
However, Albion Financial Advice director, Dariusz Karpowicz, warned that there is a lack of knowledge about tracker mortgages, stating that most first-time buyers “have never even heard” of them.
He described this as “a shame” as they could be a “genuinely useful short-term play”.
But Lifetime Wealth Management mortgage and protection specialist, Katy Eatenton, suggested that tracker mortgages may not be for everyone.
“It’s more about the experience and advice of the broker than how clever the borrower is,” she said.
“If their circumstances and their attitude to risk works for a track, then that will be recommended, but not everyone will be in a position to take the risk if rates go up while hoping for a reduction.”
Thanks to the Newspage community for sharing their thoughts with FT Adviser
tom.dunstan@ft.com
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