Fixed or Capped Mortgage ?
first direct (firstdirect.com) has launched a 3 year Capped Tracker mortgage as a solution for borrowers unsure of how long the current record low 0.5% base rate can last, and whether they should track or fix. The 75% LTV deal currently charges 3.08% (2.58% plus Bank of England base rate), and is a full 1.24% cheaper than the average 3 three year fixed 75% LTV mortgage.
first direct’s calculations seem to show that if the Bank of England Base Rate (BR) remains below an average of 1.75% over the next three years, its Capped Tracker mortgage holders will always be better off than their contemporaries taking the market’s current average fixed rate of 4.32%.
So for a £150,000 mortgage holder, at today’s base rate, they would be over £100 per month better off with FD’s capped tracker, than the same borrower taking today’s average 3 year fix.
Should rates spike, the capped borrower has a maximum downside of being just £22.08 per month worse off, as the cap will stop monthly payments rising further.
first direct’s capped tracker is always more favourable than today’s average 3 year fixed rate of 4.32% until the BR reaches 1.75%.
Generally speaking, a capped tracker mortgage will secure homeowners against Base Rate rises and save them money over the next 3 years.
Source:first direct
