You'd be mad to ignore 2.19% tracker mortgages!

With lenders frequently undercutting each other, there are bargains to be found in the tracker market.

After the last couple of years, it would be easy for us Brits to have been put off home ownership.

It seemed such a rosy love affair. The loosening of credit rules meant more of us were able to buy our homes than ever before. And that investment looked a smart one, with house prices on an incredible upward trajectory for a decade, making an awful lot of people an awful lot of money.

It even made life easy for the television companies, who came up with property programme idea after property programme idea to fill up the schedules.

Of course, then Northern Rock and the credit crunch came along, and the bubble burst, leading to some fairly nasty house price falls. You’d think the love affair would be over, that we would be embittered, never wanting to discuss how we had had our hearts broken by an asset that promised so much but less us down.

You’d be wrong.

The love affair goes on

According to the latest opinion poll carried out by YouGov on behalf of the Council of Mortgage Lenders, long-term desire for home ownership is stronger than ever. The poll found that 85% of us want to be living in a property we own within the next decade, up from 84% three years ago.

What’s more, that figure was highest among younger Brits, aged between 18 and 24, who have seen the effects of the credit crunch and clearly shrugged it off, unimpressed. Demand to own our own home is clearly ingrained pretty deeply.

The mortgage maze

Of course, knowing that you want to own your home – even finding that home – is the easy part. The real difficulty brought on by the credit crunch and subsequent recession has been funding the purchase.

And make no mistake about it, it’s still pretty tough to get your hands on a decent mortgage, particularly if you’re a first-time buyer. The biggest lenders in the nation were the ones most badly hit by the crunch. Funnily enough, they are in no rush to lend vast amounts.

However, the mantel has been taken up by some of the smaller lenders, outfits that you won’t necessarily find on your local high street but who feel able to offer some seriously competitive mortgages, if only for a limited period, not wanting to be overwhelmed by demand.

Taking a risk

And it’s in the variable mortgage market where you’ll find the most attractive mortgage rates. The very idea that you can get a mortgage rate priced at less than 2% is astonishing when you consider historical rates, and yet with a sizeable deposit (and sadly a sizeable stash of cash to hand over as a product fee) you can do just that.

Indeed, just in the last week, one of the nation’s most impressive lenders has launched yet another eye-catching deal, which sets it apart from its rivals.

Market-leading deals

First Direct last week launched a new two-year variable mortgage, tracking bank base rate + 1.69% for two years, so a current rate of 2.19%, for borrowers with a deposit of 35%.

Not only is the rate fantastic, but the added bonus is the paltry fee – just £99. As you can see from my tables below, while you can take advantage of some incredible rates with tracker mortgages at the moment, you will often face a massive fee for the privilege. Not with this deal.

Attitude to risk

Life is far from simple though, and there is an inherent danger with going with a variable mortgage – the rate you pay can change. And with base rate at a record low, the only way it is going to change is your payments are going to increase. When the increase will come, nobody really knows.

Personally, I’m very wary of variable mortgages for this precise reason. I like to know what I’m going to be paying, and I don’t want to be locked into a deal where my payments are likely to increase to a punishing level at any time, and I’m trapped.

However, that attitude doesn’t necessarily prevent me from going for a particular type of variable mortgage.

Lifetime trackers

Lifetime trackers (or term trackers as they are also known) are, in my view, the safest type of variable mortgage to go for. You get to take advantage of a fantastic low rate (albeit one slightly higher than the best two-year trackers, for example) but you can get out of them easily, as there will be no early repayment charge to pay.

So if the Bank of England base rate jumps suddenly and sharply, you can move over to a fixed rate mortgage without having to hand over thousands of pounds, which isn’t the case with most tracker deals.

You’d be mad to ignore tracker mortgages at the moment, but you’d have to be completely crazy to ignore the benefits of a term tracker.

10 terrific tracker mortgages

10 terrific term trackers

More: The mortgage monopoly may cost you money | The dodgy landlord scammers

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.