New mortgage borrowers should avoid trackers and opt for a fixed rate deal instead, according to Bestinvest.
After rapid cuts in the Bank of England base rate, which has fallen 3.5% in just a few months, and Bestinvest says mortgage customers are unlikely to benefit from any further cuts and should consider the long-term when arranging their next home loan.
Bestinvest's research found less than 50% of mortgage lenders have passed on some or all this month's 0.5% cut in base rates, and the firm expects more lenders to put 'collars' on their rates.
Nationwide and Halifax, some of the largest lenders in the UK, have already collared their rates, and tracker customers will not benefit from any further reductions in base rates.
"Mortgage rates have hit the bottom, even though the base rate may have fall further," Bestinvest says. "Margins on new trackers are being raised to keep the minimum initial pay rate at around 4%."
New borrowers should consider taking a fixed rate, the firm says, as trackers are unlikely to come down further and fixed rates are now priced at around 4%, meaning the initial pay rates is very similar.
"For new borrowers looking to purchase the most likely major change in mortgage rates will be upwards - so fixing is something worth looking at.
"We don't see rates increasing in the next few months - but if lenders feel there will be no further downward movement, they will start to increase fixed rates as these will be the most popular choice in a rising market."
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From 6 April 2019