Homeowners could split mortgage with some lenders

The four recent interest rate rises enforced by the Bank of England, coupled with at least one more interest rate rise predicted for this year, has seen many consumers panicking when it comes to finding the right mortgage.

Many are wondering whether to opt for a fixed rate mortgage in order to avoid the pinch of further interest rate rises, but lender have already taken predictions into account when setting the fixed interest rate, and consumers can therefore find themselves being fixed on a very high rate of interest.

Another option is a tracker mortgage, which many consumers are also considering, and this is where the mortgage interest rate tracks the Bank of England interest rate.

However, with further interest rate rises predicted this means that the mortgage rate could go up, along with your mortgage interest rate and your repayments. For those looking to take out a mortgage it can all be something of a gamble.

However, experts are now stating that some lenders will allow borrowers to split their mortgage, and have half on a fixed term basis and the other half of the loan on a tracker basis. This makes the mortgage less of a gamble for the borrower, although it does mean putting extra work into finding the right tracker and the right fixed rate mortgage deal.

Jonathan Cornell of brokers Hamptons Mortgages stated: 'The advantage is that you are effectively splitting the risks involved. '

The disadvantage is that you have to do twice the research. You also need to check that both finish at the same time, or you could find half your mortgage on the expensive standard variable rate, which is never a good idea.' He also added that although there is still usually only one arrangement fee for a split mortgage, it is normally the higher of the two.

 

Tom Smith
7th July 2007

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More Information:

• What Are Tracker Mortgages?
  With a multitude of mortgages available what are the benefits and disadvantages of the product known as a tracker mortgage?
• Why Does The Interest Rate Of Your Mortgage Change?
  The biggest difference between a mortgage and other types of loan is the fact that the interest rate changes throughout the term of the loan. Why is this? And which type of interest-rate arrangement is best?