Mixed outlook as fixed-rates rise while trackers cheaper than ever

Fixed rates have risen to their highest level for a year while interest rates on trackers have fallen to record lows, making an interesting choice for those requiring a new mortgage deal.

According to research from Moneyfacts, the average two-year tracker costs 3.4 per cent, the lowest level since 1988. Meanwhile, the average cost of a two-year fix hit 4.59 per cent – a 10-month high.
While several lenders have cut their tracker rates in recent weeks, those same lenders have been busy raising their fixed rates. And with interest rates likely to rise sooner rather than later, borrowers are facing a difficult decision – the security of a fix or take a gamble on a cheaper variable rate?

If you don’t need the certainty of knowing how much your mortgage payments will be, a tracker might make more sense than a fix. Some are so much cheaper than fixes that you could cope with several increases in base rate before you would be paying more than if you had opted for a fix initially.

If you want to keep your options open, you could consider a tracker that enables you to switch to a fix at any time without penalty. This gets you the best of both worlds but bear in mind you will pay more for a fix if you move onto one when interest rates are rising.
 
Private Finance has access to tracker rates from 2.09 per cent and fixed rates from 2.74 per cent.  Click here to check our best buys.