There has been alot of press recently about the fact tracker rate products are more “popular” than fixed rates and whilst this is undoubtedly the case, could this be a big problem in the making?
It is of course no surprise that in recent times the popularity of the fixed rate product has waned as people come to terms with the financial environment. The “as cheap as possible please” line has been even more popular than usual as not only have many clients expected that Bank Base will stay low, but also that low tracker rates now are a shot in the arm to many, helping to keep the wolf from the door.
It is however, easy to become blasé about this status quo and get sucked into the cheapest is best vacuum. The reality is rates are going to rise and margins on tracker products are higher than ever. The conversation with those clients in these times perhaps should not just be around can you afford a 1% rise, rather over the next few years, can you afford a 2%, 3% or even more rise?
I suspect as we get closer to the time that it looks like rates will finally rise again we will see a growth in the number of fixed rate products being taken. We are at least starting to see more enquiries from those who see a fixed rate as their next logical move.
Of course it all depends on your interest rate point of view, but I do worry that actually more fixed rates should be being taken now, especially by those who have been enjoying a prolonged “holiday” on a lenders low variable rate.
The good news is that with some competition returning to the market fixed rate products are becoming more attractive, so the difference between a tracker and the security of a fixed is becoming more blurred. Once that first change in Bank Base occurs no doubt there will be a panic rush to the sanctuary of a fixed by many, but as ever, it all comes down to obtaining sensible advice.
It is not all about whether a tracker rate “beats” a fixed rate, it is about what is good for each individual client, and for many, even if they do end up paying a little more, the knowledge of security is priceless.