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Trackers with no ERCs are mortgage top choice

Borrowers have been opting for tracker products with no early redemption penalties in the first month of 2008, says John Charcol.

The broker revealed its top three mortgage products sold in January have all been bank rate trackers with no early redemption charges.

Technical manager Katie Tucker says: “The bank rate is widely expected to fall, so trackers or discounts make sense for most borrowers, and one with no tie-in at all means you can remortgage away when you like: it seems that borrowers seem to be awaiting a new wave of sub-5 per cent fixed rates.

“Two-year swap rates, which indicate bank’s predictions of bank rate in two years, and in turn set the price for fixed rates, dropped considerably following the last bank rate reduction, but lenders have not yet brought down their fixed rates accordingly; most are making up for the high cost of their lending in last quarter of the last year due to credit crunch.”

Tucker says another bank rate drop should give lenders sufficient confidence that the cost of their funds will remain low, allowing more of them to offer fixed rates under 5 per cent.

Brentchase Financial Services mortgage specialist Mike Fitzgerald says: “We have found a lot of people are going for these products. I think the public have had enough of fees.”

Mortgage analysis, p44

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