New Mortgage Allows Switch From Tracker To Fixed Rate

A new mortgage has been announced that allows borrowers to switch from a tracker rate to a fixed rate at any time in the future without having to pay an early redemption charge.

Principality, Wales’s biggest building society, has just announced a new three year tracker mortgage, that can be later switched, without penalty, to a fixed rate product.

The initial tracker rate is based on the Bank of England base rate plus 2.49%, which totals 2.99%, one of the lowest base rates in the market.

Should borrowers start to worry about rising interest rates, they can then switch the product to a fixed rate product at the prevailing rates, without having to pay the 3% early redemption charge.

If the borrower chooses not to switch, the 3 Year Tracker rate will change to the Society’s Standard Variable Rate, currently 4.99%, for the remainder of the mortgage. The overall cost for comparison is 4.8% APR.

This mortgage has been designed to help borrowers who cannot decide if a tracker or fixed rate mortgage will suit their needs best, as James Wright, Marketing Director at Principality Building Society, comments:

“We recognise that the current climate coupled with conflicting economic forecasts, pose a confusing set of circumstances for borrowers. While the City predicts low interest rates for some time to come, chief economist of the Policy Exchange think tank, Andrew Lilico, recently forecasted that interest rates could reach 8% by 2012 – a move that would see mortgage repayments soar.

“This new mortgage deal offers borrowers a competitive tracker mortgage, with the option to fix in and secure their mortgage repayments for a set term, should more evidence emerge to indicate an interest rise in the near future.”