Tracker mortgages growing in popularity

Tracker mortgages are growing more popular than fixed-rate mortgages as a result of expectations that the base rate of interest will fall, it has emerged.

A total of 35 per cent of borrowers opted for a tracker mortgage last month, up from 33 per cent in January, according to new research from the Council of Mortgage Lenders (CML). This figure was up from 14 per cent a year ago.

Meanwhile, fixed-rate mortgages fell to their lowest level of popularity since March 2005.

“The trend away from fixed-rate products continues as expectations of further bank base rate reductions, probably starting this week, have increased,” commented Michael Coogan, director general of the CML.

The Bank of England’s Monetary Policy Committee will meet on Thursday (April 10th) amid predictions that the current base rate of 5.25 per cent will be reduced.

However, expectations of a cut in official rates have also prompted lenders to increase their rates on tracker mortgages.

The CML also reported that the number of loans for house purchase dropped by 3.5 per cent from last month to 49,200, the lowest quantity since records began in 2002.

Tags: cent, council of mortgage lenders, lowest quantity, base rate, Thursday

Interest rate cuts ‘cannot be banked on’

Despite consumers anticipating that interest-rate cuts will take place throughout the year, it is likely that if further cuts are made they will be done so cautiously, one financial expert has claimed.

According to the Fairinvestment.co.uk, up to 29 per cent of consumers expect the rate to fall from the current 5.25 per cent to 4.75 per cent by the year end, while a further 27 per cent are anticipating a rate of 4.5 per cent or below.

James Caldwell, fairinvestment.co.uk director, said that consumers see the interest rate cuts as necessary to ease pressure on household budgets.

However, he said that making the decision to cut rates is not straightforward with various factors having to be taken into consideration.

“Therefore, it is likely that rates will be cut with an air of caution if there are to be further reductions this year,” Mr Caldwell concluded.

The Bank of England’s Monetary Policy Committee last voted to reduce the interest rate, from 5.5 per cent to 5.25 per cent, in February 2008.

Tags: rate cuts, committee, interest rate cuts, Bank of England's Monetary Policy Committee, consumers, cent