Mortgage borrowers are turning to trackers with no early redemption penalties in anticipation of a base rate drop in February, according to John Charcol.
The mortgage broker says statistics show its three most popular mortgage products sold so far in January are all tracker rates with no early repayment charges (ERCs).
Rumours of a base rate cut in the coming weeks, coupled with a lack of good fixed rate deals, are causing customers to leave their options open by opting for tracker rates that can be repayed at any time, with no penalty.
Katie Tucker, technical manager at John Charcol, explains: “Bank rate is widely expected to fall so trackers or discounts make sense for most borrowers, and one with no tie-in at all means you can remortgage away when you like: it seems that borrowers seem to be awaiting a new wave of sub-5% fixed rates.”
Tucker says swap rates – the rates which determine fixed rate pricing – have been falling since the last base rate cut, but lenders have been slow to follow as they attempt to offset the high costs of lending in last year’s credit crunch.
She says a base rate drop in February should help to bring some fixed rates down below 5%. However, low fixed rates have been very popular recently, with Bristol & West’s sub-5% offering selling out in less than a week.
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