Tide has turned on fixed rate deals

GMAC-RFC is predicting an increased demand for discounted and tracker mortgage deals in the year ahead. With the continued rise in the price of short term fixed rate deals, the gap between fixed and discounted (or tracker) products has widened, which will make the variable options more appealing to many borrowers.

Latest figures from the Council of Mortgage Lenders (CML) show that since the beginning of 2007, more than three quarters of all mortgage loans have been fixed rate deals. But, as swap rates continue to increase, and current fixed rate deals are already priced high to account for another move in interest rates, intermediary, and indeed, consumer appetite for alternative products is inevitable.

Discounted and tracker rate mortgages provide attractive alternatives for those looking for a good deal, and for some, these deals can actually work out more suitable than a fixed rate deal. By way of comparison, a self-cert borrower could save up to £1026.72 over two years if they opted for GMAC-RFC’s self-cert 2 year discounted variable rate mortgage , against its self-cert 2 year fixed rate mortgage.

Julie Gaskin, Corporate Relations Manager, GMAC-RFC comments: “In a rate rising environment it often makes sense for borrowers to take out a fixed rate deal, especially if a future rate rise would mean their monthly mortgage repayments will increase, and this has certainly been the mantra of many a mortgage expert over the last few years. However, the tide is now turning, and fixed rates currently on offer are higher than we have seen for several years, as they are factoring in for one or more future rate rises, making tracker and discounted deals look increasingly attractive, and in many cases cheaper”.

Gaskin continues: “Now is the time for intermediaries to harness the change and look towards tracker and discounted products to drive business growth as demand for this type of product will inevitably increase in the foreseeable future. Those that shy away from this may be missing a trick with consumer hungry for a good deal.”

GMAC-RFC has recently revised its intermediary range of 2 year discounted variable rate products across mainstream, self-cert and buy-to-let. As of yesterday, these will change to rolling end dates and the mortgage loan term will begin on the date of completion.