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‘Tracker’ mortgages are down to almost THREE per cent – £973 cheaper than firm deals

Building societies are offering new variable-rate mortgages for just 3.39 percent with a five percent down payment, because they’re more affordable than fixed rates after the economic turmoil in the wake of Liz Truss’s mini-budget.

‘Tracker’ mortgages are quickly becoming the cheapest deals in the UK mortgage market as leading brokers maintain fixed rate mortgages above six per cent in response to the Bank of England’s high interest rates.

Building societies are now offering rates as low as 3.39 percent for buyers with a five percent down payment as a sign that the mortgage market is calming down and in preparation for the decline in fixed-rate mortgages.

For higher deposit rates, deals are even better. The Yorkshire Building Society offers a tracking rate of 3.29 per cent to those with larger deposits, compared to the current average two-year fixed deal of 6.21 per cent.

At a mortgage level of £400,000, this equates to monthly savings of £973, the Telegraph reports.

After Liz Truss and Kwasi Kwarteng’s disastrous unfunded mini-budget, mortgage rates quickly rose to their highest level in years, with an average fixed term of more than six percent.

But brokers say they are now seeing much higher demand for tracker mortgages, which rise and fall in line with the Bank of England interest rate.

Yorkshire Building Society offers a tracking rate of 3.49 percent for clients who can make a 15 percent down payment, 2.13 percentage points lower than the equivalent two-year fixed rate of 5.62 percent.  This would save buyers £412 per month

Yorkshire Building Society offers a tracking rate of 3.49 percent for clients who can make a 15 percent down payment, 2.13 percentage points lower than the equivalent two-year fixed rate of 5.62 percent.  This would save buyers £412 per month

Yorkshire Building Society offers a tracking rate of 3.49 percent for clients who can make a 15 percent down payment, 2.13 percentage points lower than the equivalent two-year fixed rate of 5.62 percent. This would save buyers £412 per month

This is believed to anticipate a significant fall in fixed-term mortgage rates over the coming weeks and months, meaning that customers who close a deal now will find they will pay more over a longer period of time.

With uncertainty still in the market, mortgage lenders are being forced to offer firmer deals at higher interest rates as Bank of England interest rates are not expected to have peaked yet.

But with tracker deals, this price hedging doesn’t have to happen, as interest rates rise and fall automatically along the bank’s baseline.

Based on a buyer buying a property for £400,000 and looking for a two-year deal, Skipton Building Society offers new clients a follow-on mortgage of 3.39 per cent, or £2,376 per month, with just a five per cent down payment or £20,000. .

Their fixed rate deal for the same deposit is almost two percentage points higher at 5.07 per cent, or £2,832 per month.

Meanwhile, Yorkshire Building Society offers a tracking rate of 3.49 per cent for clients who can make a 15 per cent down payment, 2.13 percentage points lower than the equivalent two-year fixed rate of 5.62 per cent. This would save buyers £412 per month.

Coventry Building Society has also joined the tracker trend, offering 3.98% or £1,790 per month for a 15 per cent down payment, compared to 5.45 per cent for a fixed deal, which would cost £2,077 per month.

Nationwide also offers significantly cheaper tracker rates with just a five per cent deposit required – from 5.99 per cent for a fixed deal and 5.34 per cent for a variable rate, saving customers £149 per month.

Craig Fish, director of Lodestone Mortgages & Protection, told MailOnline that the price difference is “staggering.”

He said: “I’m not recommending fixed rates to anyone at this point because I think there’s still quite a bit of room for downward momentum. Looking at current rates, the lenders still have quite a bit of margin built in at this point, and this could be trimmed further.

“I hope fixed rates will fall below four percent at some point in the undoubtedly challenging new year as lenders look to eat into their annual loan targets early.

“At this point I’ll probably start recommending flat rates again, but until then tracker and variable rates at a discount, with no ERCs, all the way.”

He added: ‘The price difference is huge. If you can get a tracker for almost three per cent below the nearest flat rate, with savings on monthly payments in some cases in excess of £500 pcm, that’s a no-brainer.’

The West Brom construction company is offering a two-year tracker deal at 3.94 per cent, or payments of £1888 per month, with a flat rate of 5.49 per cent, equivalent to £2208 per month.

But some brokers are showing more caution, with the Leeds Building Society website indicating it is still not offering tracker mortgages to clients.

This comes after five-year fixed mortgage rates fell below six percent for the first time in seven weeks, data showed yesterday.

The five-year average fixation is now 5.59 percent, down from a 14-year high of 6.51 percent last month, comparison website Moneyfacts says.

It says two-year fixed rates have also fallen, with deals averaging 6.13 percent, down from a peak of 6.65 percent in October.

Yesterday, both Santander and Barclays cut their fixed income deals by 0.3 percentage points.

About 80 percent of mortgages are currently fixed.

Rachel Springall, financial expert at Moneyfacts, says: ‘Borrowers can breathe a sigh of relief as they see fixed mortgage rates starting to fall, but there may still be a lot more room for improvement.

Rates could fall even further, but there’s no clear answer on how fast that could be.

“Customers may feel that they need to be patient before they take out a new fixed mortgage.”

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