Tracker mortgages poised to become best deals

Tracker rate mortgages are poised to become the best valuable deals in the market as money market movements increase the prices of fixed rate deals, says the Woolwich.

Many providers are planning imminent hikes to their fixed rate offers as a measure called the swap rate – which sets the cost of banks borrowing between themselves ñ rises.

The swap rates are determined by where the money market predicts the Bank of England will set the base rate of interest, and therefore the cost of borrowing, in the future.

“Rapidly increasing Swap rates, pushed higher by a view that base rates will rise this year, are having the effect of making fixed-rate products increasingly expensive to put together, making the rates uncompetitive,” said Andy Gray, of Woolwich mortgages.

For the past year or so, fixed rate deals have offered the best mortgage rate as analysts predicted that the base rate could be cut to 4.25 per cent, from a current 4.5 per cent.

After months of expecting further falls, analysts are beginning to suspect that the next move could be upwards, as the Bank warns of rising inflation.

© Adfero Ltd

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