Tracker rate mortgages will 'probably stay stable'

Date:Tuesday 1st September 2009
Author: Max Freedman

People on tracker rate mortgage deals have been told their interest should stay stable as long as the base rate is kept low, according to an industry analyst.

Peter O'Donovan, head of mortgages at Bestinvest, has commented that "recent noises" suggest the Bank of England could keep the base rate low until next year, which may keep tracker deals down too.

He also pointed out that it is no surprise that tracker mortgages are now taking up a much larger share of the market than fixed-rate deals, as he claims the latter charges substantially higher interest at the moment.

"They would rather take the risk of staying at a reasonably low rate for a longer period of time than taking the security of a fixed-rate because it is overpriced," he said.

Mr O'Donovan noted that interest rates on long-term fixed-rate mortgages are currently over five per cent, whereas some tracker deals are as low as 2.75 per cent.

Mortgage broker John Charcol reported last week that the share of the market taken by variable rate and tracker deals more than doubled from June to July to reach 34.7 per cent.