In a Fix Over Variable Mortgage Rates

In a recent article posted on Mortgage Strategy, Natalie Martin questions whether variable mortgage rates currently offer the best value for money. December’s figures would show they are certainly proving very popular, with John Charcoal reporting as many as 4 in every 5 home loans arranged in the month were variable rate mortgages.

So why are more people ready to take the gamble? Ray Boulger, senior technical manager at John Charcoal says “With the average difference between the best fixed rates and the initial rate on the best trackers around 1.5% in favour of trackers, it will currently take a substantial rise in bank rate for a borrower who takes a tracker to be worse off than one who opts for a fixed rate.”

Whilst the future is difficult to predict, experts seem to be agreed on one thing; any rise in interest rates will not be a dramatic one. The Times Online shares the views of mortgage gurus on what will happen to interest rates in the future:

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors says “I don’t see rates going up very aggressively. There are significant challenges facing the economy, and while I don’t expect a double dip, it won’t be plain sailing.” Melanie Bien, director of Savills Private Finance agrees; “We are in a low interest-rate cycle so even when rates so start to rise, they are likely to do so slowly and I wouldn’t expect them to go above 2% in the next couple of years”

It’s definitely worth considering how much extra you would be willing to pay for the security of a fixed rate and keeping an eye out for those short term trackers. However, the bottom line is simple; if you cannot afford a rise, opt for a fixed rate.