Friday, February 22, 2008

Tracker Mortgages

Mortgage can come in many different forms and we do well to be informed before taking one. For example, the tracker mortgage is a type of mortgage that ties in directly to the Bank of England base rate and not the lender's rate, which is always higher. For a first time buyer, the margin is set to a maximum of only 1% or 2% above the Bank of England base rate. And in some special cases, the rate may even be set below the rate. This is especially attractive because it means that repayments during the life of the tracker offer, (usually from 2 to 5 years), are invariably cheaper than with other standard mortgages. This is something that will be really conducive to young couples or families looking to buy their first house.

The good news is the Bank of England had recently announced a cut from 5.75% to 5.5% in December 2007 and this has increased the popularity of tracker mortgages. According to the director of Andrews Mortgage Services, Chris Chapman, "With this [fall in interest rates] in mind it''s no wonder tracker products proved to be flavour of the month in January with over a third [our] of new borrowers arranging mortgages on this basis. Lower interest rates will also boost confidence in the mortgage market and encourage people to purchase a property."

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