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Consumers urged to avoid tracker mortgages

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Mortgage holders should avoid tracker mortgages and opt for a fixed rate deal, according to one expert.

Peter O'Donovan, head of mortgages at Bestinvest, explained that an increasing number of lenders are introducing collars on tracker deals, meaning the rate will not fall any further than it already has.

This, combined with the fact that many mortgage lenders will not pass on any future cuts in the base rate for new products, makes it a good idea to take a fixed product if looking to remortgage, he stated.

However, borrowers will have to act fast to get a competitive fixed rate mortgage, Mr O'Donovan warned.

We don�t see rates increasing in the next few months - but if lenders feel there will be no further downward movement, they will start to increase fixed rates as these will be the most popular choice in a rising market, he said.

Among the best deals currently on offer are a two-year deal with Alliance and Leicester at 3.69 per cent and a five-year fixed mortgage from Woolwich at 4.69 per cent, Mr O'Donovan added.

Yesterday, Louise Cuming, head of mortgages at, warned that lenders have increased the margins on their tracker deals, meaning customers could be left out of pocket if the base rate goes up.

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