Tracker mortgage a choice for long-term confident

20-Apr-2007

With expectations rising that the Bank of England will raise interest rates again next month many first time buyers are scrambling to pick up cheap fixed rate deals before they disappear.

But while another rate hike looks almost certain many economists believe that rates will come down again by the end of the year, meaning that first time buyers could benefit from taking out a tracker mortgage instead.

Following the Bank of England's announcement that consumer price inflation in the UK had reached 3.1 per cent, speculation of a quarter point rise to 5.5 per cent grew dramatically.

Indeed, there has even been talk of a possible half point rise to 5.75 per cent, leaving homebuyers jittery and forcing many lenders to up their fixed rate prices.

However it is still widely believed that interest rates will begin to fall again towards the second half of the year as previous hikes start to curb demand, making tracker mortgages a more attractive option and encouraging lenders to offer cheap fixed rate deals once again.

Katie Tucker from Charcolonline said: "If they are prepared to take the long-term view that rates will come down again in the next year, borrowers could look to take out a tracker with no early repayment charges so that they can switch out if and when fixed rates improve."

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