Tracker mortgages shunned as borrowers seek fixed rate deals

Tracker mortgages are falling out of favour as home owners look to secure fixed rate mortgage deals.

The demand for tracker mortgages is plummeting as borrowers are increasingly expecting interest rates to rise in the coming months.  Research by Santander indicates that those likely to opt for tracker deals is falling from 33% to 13% of borrowers.

According to the bank, more than 880,000 UK homeowners on tracker or fixed rate mortgages, could be looking to remortgage in the next six months.  This means that nearly 5,000 borrowers per day will be seeking to arrange better mortgage deals – many of them seeking fixed rates.

Half of these people (50 per cent) favour a two year fix rather than a three or a five year deal.

Phil Cliff, Director Mortgage Marketing at Santander said: “A significant number of people could remortgage in the next six months and among those considering their next deal there is a potential for a fall in demand for tracker deals. Borrowers have seen a large number of highly competitive fixed deals come on to the market recently and with many commentators predicting a base rate rise this year, homeowners now seem more inclined to play it safe with a fixed rate deal.”

This research coincides with the news that Santander is reducing the rates on some of its two year fixed rate mortgages by up to 0.4%.  These mortgages, fixed at 4.99% require a maximum 80% LTV and incur a £995 arrangement fee.