If you are looking for a new mortgage at the moment, then something you should maybe consider would be a tracker mortgage. Rather than being a fixed rate for a certain number of years, a tracker simply follows the Bank of England base rate, plus a certain percentage. So for example a tracker mortgage may be offered at Base Rate + 2.49%, which would mean the actual mortgage interest rate would be 2.99%, since the base rate is currently at 0.5%.
Beware though that some tracker mortgages use the same percentage addition to the base rate for the entire mortgage term, while some offer a ‘discount’ for the first few years. So it might be +2.49% for the first two years, then +3.49% for the remainder of the term.
Even though the base rate has been at a record low of 0.5% since March 2009, it is forecast by many that the rate will stay there for perhaps another couple of years. So even though you need need to be aware that changes to the base rate will change the amount you pay each month, it is fairly unlikely to change for quite some time. And of course, there is the possibility that the base rate could go even lower – saving you money each month.
As with fixed rate mortgages, the deals that are available vary quite considerably depending on the size of your deposit. People with a 25% deposit or more should easily be able to find a tracker mortgage at a rate of less than 3%. Those with a 15% deposit would be looking at around 4%, and those with a 10% deposit would be about 5%. As always, when comparing mortgages, remember to take in to account the other factors, such as the mortgage fee – which can vary from free to £2000 in some cases!