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Are tracker mortgages the way to go?

Journalist: Jake Carter, Mortgage Introducer

ended 03. November 2022

With rates presenting uncertainty at the moment, the Telegraph said searches for tracker mortgages grew by 115% in the week to October 17 compared to the week before the mini-Budget.

Have you seen a rise in demand for tracker mortgages?

Is a tracker mortgage the best option for customers right now?

If so, why? If not, what option is?

4 responses from the Newspage community

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Andrew Montlake
Managing Director at Coreco
We have definitely seen an uptick in people taking out tracker mortgages and when there is a 2% to 3% difference in discounted variable and tracker rates compared to their fixed alternatives, it is something that has to be discussed. As ever, it comes down to clients' personal attitudes toward risk and their personal circumstances, but in today's environment, a tracker or discounted variable may well be the best option for an increasing number of borrowers. For many, this gives them a lower payment now and, where there are no Early Repayment Charges, an opportunity to switch to a fix at a later date, especially if we are going to see fixed rates ease again, which looks increasingly likely. Hindsight is a wonderful thing, but those borrowers who paid ERCs to fix in at higher fixed rates may feel that this was the wrong option, whilst those who decided to wait patiently on a variable rate for the market to calm may end up the ones with a smug grin. That said, fixed rates are always seen as an insurance policy, so for those who ultimately want the security of knowing what their payments will be every month and do not want to lie awake worrying before every rate announcement, fixing will always be the best option. For those who can afford to be a little more flexible, it seems that this season at least, trackers are the new black.
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Mike Staton
Director at Staton Mortgages
The biggest misconception in the mortgage industry is that of Rates, most people normally ask, what is best but the answer is far more complex than people realise. For me Trackers are fantastic at the moment, many on offer are more than half the rate of the fixed mortgage thats on offer with the same lender, this is attractive to many people, but basing your mortgage application purely on an interest rate could be deadlier than Liz Truss with a calculator. Clients need to be looking long and hard at their disposable income when going down the route of a tracker, whilst the initial rate could blow your socks off in the current market any increase could make your mortgage unaffordable. Some Tracker mortgages do come with early repayment charges too, so make sure you are fully advised on any product that you take out and you completely understand the lenders criteria fully before applying. I have stated previously that people on trackers will be the first to benefit from rate drops and i still believe this to be true. My own remortgage is due in April and i am seriously considering a Base Rate Tracker with no ERC.
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Graham Cox
Director at Bridging Hub
Interest in tracker mortgages has soared as clients have become aware how much cheaper they are. For now anyway. They're definitely a gamble, but possibly a good one, as long as you can afford to take the risk. With fixed rates around 6% and trackers 3-3.5%, it's possible you'd still be quids-in even if the base rate hit 5%.
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
Interest rates are expected to keep increasing potentially all the way up to 5% this time next year. A tracker mortgage is lunacy in our opinion as a result. Property Investors should be locking in the best long term (e.g. 5-year) fixed rates they can get now and sighing in relief. In fact those with a year left on exisiting fixed rates should genuinely be looking at the costs of exiting early to lock in now instead of down the line when costs will be even higher. It will take a number of years before rates start to come down again and it's far better to hedge at a price that you can afford now then risk it being flexible and ultimately potentially pricing you out entirely.