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Fixed mortgage rates vs tracker mortgages

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Mortgage borrowers might be wondering whether they should choose a fixed rate mortgage or a mortgage that track the base rate, following the decision by a number of mortgage lenders to increase their fixed mortgage rates .

Predictions that the Bank of England may lower interest rates early next year could also make mortgage borrowers consider remortgaging to a tracker mortgage .

Price comparison website Moneysupermarket believes many fixed mortgage rate products still offer mortgage holders mortgage rates of lower than 4.5 per cent.

However, if fixed rates continue to get any higher, a tracker mortgage may be a better alternative, says the website's head of mortgages , Louise Cuming.

When comparing the best two-year fixed rate mortgage with the best two-year tracker mortgage, Moneysupermarket found that the fixed rate mortgage had a slight advantage of �93 for the mortgage term.

Ms Cuming is urging customers to shop around when they try to find a remortgage, but warns that they should not get stuck paying their mortgage lender's standard variable rate (SVR) in the process.

With the average SVR at 6.5 per cent, a borrower who opts for a 4.49 per cent fixed rate with Bank of Scotland , a borrower could save �2,997 a year on an interest-only mortgage of �150,000, she points out.

This is why choosing a fixed mortgage rate is always a better alternative than letting one's mortgage languish with the SVR, Ms Cuming advises.

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