In these uncertain times, most people don't seem to know which type of the mortgage deal is the best to select.
With Bank of England interest rate so low most people assume that interest rates will, sooner or later increase. However, the issue with a fixed rate product is that if the rate does not increase or only increases a little and then remains static. If you had chosen a fixed rate there is a possibility that you may be paying above what you need to. This has its advantages, the security of knowing what your payment will be may be worth the extra in payments.
With a Bank of England tracker mortgage your mortgage increases or decreases with the ups and downs of the Bank of England interest rate. Therefore, if as outlined above people feel that interest rates will increase, then the payment on this style of mortgage will increase. However, if you don't feel that interest rates are going to increase straight-away or increase only a little and then stall, then this method would appeal. The only problem with this is that what if your wrong and interest rates just go up and up.
So both basic types of Fixed or Tracker rate products have their limitations:
The Third Way!
A Capped Rate:
This is a mixture of both products, it is a tracker mortgage, but it can not go above a specified rate - the cap. So you benefit while interest rates are low, and if they increase a little you are still generally speaking better off than a fixed rate (at the moment) but if the Bank Rate increases above the Cap you are in-effect on a fixed rate, during that period, because if the Bank rate falls you would also fall again. In my view this is the best of both worlds.
Limitations: Caps sometimes have collars, this is when the interest rate charged can not go below a specified interest rate, recently it has become more common for Cap mortgages to have collars, you should always check the Key Facts document for full details on any Collars.
New Deal Launched.
3.99% tracker (Bank of England + 2.49%) until 30.06.12 Capped at 3.99% until 30.06.12
Maximum Loan to Value - 65%
Incentives - One Free Valuation
Remortgage Transfer Service included
Early repayment charges - only during the benefit period (4% to 30/06/12)
This is only one Capped product, it does not suggest that it is the best product for your needs, DALES can review your circumstances and make a recommendation suited to your needs. For Mortgages DALES offer an advice and recommendation service, and recommend products from the Whole of the Market.
For more details of this or other mortgage products or to arrange a free consultation please contact tel: 01636 642 844 or email advice@pndales.co.uk
Your Home is at risk if you fail to keep up payments on any mortgage or loan secured against it. P N Dales Ltd is Authorised and Regulated by the Financial Services Authority 496107.
