Potential rate cuts alter FTB borrowing habits

Posted: 19 Mar 2008 11:34:03 GMT

With the majority of analysts predicting that the base rate of interest will be cut at least once more in 2008, an increasing number of first-time buyers (FTBs) are choosing to take out tracker-rate mortgages.

With the majority of analysts predicting that the base rate of interest will be cut at least once more in 2008, an increasing number of first-time buyers (FTBs) are choosing to take out tracker-rate mortgages.

The Council of Mortgage Lenders (CML) claims that a growing number of FTBs are opting for the deals so that they can benefit from any future rate reductions.

It goes against the idea that FTBs traditionally opt for the security of a fixed-rate mortgage.

Sue Anderson, CML spokesperson, said that FTBs need to judge for themselves whether they would prefer a fixed or tracker-rate deal.

"I think it is very difficult to pick a one-size fits all solution here," she explained.

"People need to recognise their own attitude to risk and the risk of rates moving either in their favour or against them, and the extent to which they want absolute certainty about their level of outgoings," added Ms Anderson.

Global Insight economist Howard Archer recently forecast that interest rates would tumble to four per cent within the first half of next year.

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