Home Owners Opt For Hybrid Loans
With the home owner loan and mortgage market looking particularly uncertain at the moment, due to the fragile state of the UK economy and no one really knowing when interest rates on loans will increase from their currently all time low level, many people looking for a new home owner loan are uncertain as to what may be their best loan option.
A recent survey from the home owner loan broker, John Charcoal, found that around 55 per cent of customers opted for a tracker rate loan throughout the month of December, due to the low interest rates, whilst around 34 per cent chose a fixed rate loan to avoid the possibility of their loan costs increasing.
However, around 10 per cent of new loan customers opted for the best of both worlds by taking out a hybrid loan, which offers the benefits of both a tracker loan and a fixed rate loan deal.
This type of loan offers borrowers the chance to take out a tracker rate loan for the first couple of years of their mortgage, followed by a further three years on a fixed rate deal.
As many borrowers do not feel that interest rates are likely to increase within the next two years, they are happy to choose a tracker rate loan at this stage, but would like the option of being able to fix their loan repayments in the future when a rat rise is more likely.
At the moment, there is only one such loan product available on the market, from Accord mortgages, which is only available through financial advisers and loan brokers, but if this proves to be successful, it is likely that many others will introduce similar schemes.
Simon Collins of John Charcoal said “Everyone knows that the bank rate will increase at some point, but the big question is when and how fast? The hybrid is therefore the perfect product for these borrowers who want to take advantage of low loan rates now, while securing a fixed rate element at today’s historic low prices.”
