Mortgages London | Mortgages in London

In London fixed rate mortgages have been heralded as the way ahead in light of forthcoming economic uncertainty, but after the Bank of England decided to keep the base rate at 0.5% for the 15th consecutive month, some financial experts are speculating that a tracker mortgage with a penalty free opt out scheme may be more favourable in the short term.

In a poll conducted by Reuters, a total of 61 economists hinted that they believed that the base rate would stay the same until next year, but this depends on the rate of inflation, which hit a high of 3.7% in April. This is the highest it has been for a year and a half, but monthly fluctuations might mean that overall inflation has not risen above 2%, which is the target that the Bank of England set. However, to make sure that interest and inflation remains balanced, the Organisation for Economic Cooperation and Development (OECD) stated that interest rates should be raised to 3.5% by the close of 2011.

That is a large jump in the space of 18 months, but it may well buy time for borrowers in London. Borrowers with a tracker mortgage are advised to keep their current deal and make overpayments in preparation for switching to fixed rate mortgages before interest rates escalate considerably. This will not only prepare for the inevitable higher repayments, but it will increase the amount of equity in a property making it easier to find a fixed rate mortgage with a lower interest rate.

Fixed rate mortgages have long been regarded as a less risky mortgage option, therefore as the threat of rises in interest rates draw closer it is expected that more borrowers will shun tracker mortgages for their London property. Anyone considering changing from a tracker mortgage to a fixed rate deal should consult their independent broker or high street lender for advice.

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