To fix or to track?

The recent increases in rates on fixed rate mortgages have made tracker products look increasingly attractive. In fact moneysupermarket.com figures show that a borrower with a £300,000 mortgage would pay £120 a month more on an average two year fixed rate deal, than they would on an average tracker. However, with many experts predicting that Base Rates will increase this year, moneysupermarket.com warns borrowers that an increase of one and a half percentage points would reverse the situation.

If rates increase by two per cent, then the payments would rise by £171 or £343 on mortgages of £150,000 and £300,000 respectively.

Louise Cuming, head of mortgages at moneysupermarket.com, said: "Borrowers should not be seduced by the opportunity to make short term savings by opting for a tracker mortgage deal. They must take the expected Base Rate rises into consideration right from the start, and make sure that they can still afford repayments when the Bank of England begins to reverse the cuts.

"Anyone thinking about fixing must act quickly. Lenders are increasing rates on an almost daily basis and there is a strong feeling that we have now passed the bottom of the mortgage market."