Tuesday, May 30, 2023

5 Year Tracker Mortgage – The Ideal Length?

Many experts are saying that the 5 year tracker mortgage represents the best value for money in the current climate. But is this the best business you can do, or are there really better deals to be had?

These are growing in popularity, as the economy braces for a downturn in the property market which means the Bank of England will almost certainly cut rates. So naturally if you’re in the market for a new agreement, this is a great time to put your money behind a relatively short term tracker agreement.

I would probably question whether a 5 year tracker mortgage is the best thing to go through though. 2 years seems like a safer bet as 5 years is enough time to change things and cut back. It is possible to get ones that allow you to switch at a fixed rate at any point in the arrangement, and this is something you should definitely look into. After all, if things don’t go your way, you can rest easy knowing that you can revert to a stable repayment plan.

If you are the kind of person who is equally budget loving and risk averse then you might want to stay away from 5 year tracker mortgages and any other for that matter. Even expert analysts can’t predict what decisions the Bank of England will make when deciding what to do with interest rates, so it’s impossible to plan exactly how much you’ll have to pay at any one time.

A variable tracker mortgage means that you will benefit from any drop in the base rate, and if it does happen you know that you will never pay more than anyone else. This is the kind of flexibility that you don’t get with a fixed rate agreement. You can agree to a long-term deal for 5.5% interest which seems competitive at the time, but could be well above market value a year later.

Going back to my original question whether a 5 year tracker mortgage is a good idea, well, it depends on what kind of agreement your mortgage broker can get you. Before you consider them, make sure you understand all of their implications. That said, now is as good a time as any to get your hands on the mortgage tracker.

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