By contrast, the average new two-year 90% LTV tracker rate stood at 4.80% in July, producing monthly repayments of around £1,146 on the same loan. That represents a saving of approximately £111 per month, or more than £1,300 annually, against the equivalent fixed-rate product.
| Two-year fix (90% LTV) | Two-year tracker (90% LTV) | |||
|---|---|---|---|---|
| Avg rate | Cost | Avg rate | Cost | |
| February | 5.09% | £1,180 | 4.77% | £1,143 |
| July | 5.74% | £1,257 | 4.80% | £1,146 |
| Difference | +65bps | +£77 per month | +3bps | +£3 per month |
| Source: Moneyfactscompare.co.uk | ||||
“The big jump in first-time buyers researching tracker mortgages reveals the pressure higher fixed rates are putting on the budgets of hopeful homebuyers,” said Adam French (pictured right), head of consumer finance at Moneyfacts. “For many borrowers, saving more than £100 a month compared with a fixed-rate deal could make the difference between being able to buy a home or delaying their plans.
According to French, tracker mortgages currently look attractive because they are priced at around one percentage point above the base rate, making them cheaper than equivalent fixed-rate products. However, he cautioned that borrowers should not assume today’s monthly payment would remain stable.
“Money markets are currently pricing in a couple of Base Rate hikes over the coming months,” French pointed out. “If those expectations prove correct, tracker mortgage repayments will rise too.
“Recent years have also shown how our volatile times can quickly move the outlook for interest rates, so anyone considering a variable mortgage needs to ensure they have enough room in their budget to cope with higher monthly repayments.