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Tracker mortgages drop in price

Friday, 25 July 2008 12:00 AM

Homeowners have been encouraged to scour the entire market for the best mortgage deal, following another dramatic reversal in the value of certain deals.

Research from MoneySupermarket.com has shown the average two-year tracker is looking increasingly better value - when compared to some fixed-rate deals.

As of Monday this week, there was more than half a per cent worth of clear air between the best fixed-rate and tracker rate deals.

The average tracker stood at 5.9 per cent, whereas the average fixed-rate deal was priced at 6.45 per cent; the last time trackers were this low was in March this year, finds MoneySupermarket.

"In the current environment of uncertainty, it's natural to look to fixed rate deals to provide security, but our data clearly shows that it's imperative to look at the whole product range when looking for a new deal," said Louise Cuming, head of mortgages at MoneySupermarket.

"This is especially so if you can stomach a little leeway on payments."

There was little to choose from between the average two-year fix and the average two-year tracker at the start of June, but that the gap between the two has increased substantially since then.

"Trackers have been avoided like the plague in recent months due to interest rates looking unstable yet all the signs are that rates will be kept on hold for the time being, with the next movement potentially being a reduction," added Ms Cuming.

"Some are even predicting rates will go as low as 4 per cent by the end of the year to kick-start the economy, in which case trackers could be a lifeline."

The Bank of England has maintained interest rates at five per cent since the last 0.25 per cent cut in April.

Chris O'Toole

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