Track or switch

Nia Williams

September 3, 2010

Borrowers who take out Principality’s three year Tracker Switch to Fixed product, available at a variable rate that tracks the Bank of England base rate plus 2.49% until 30/09/2013 (currently 2.99%), can do so with the security of knowing that they can switch to one of the society’s rate switch fixed-rate products at any point in the future without having to pay the early redemption charge of 3%.

If the borrower chooses not to switch, the three year Tracker rate will change to the society’s standard variable rate, currently 4.99%, for the remainder of the mortgage. The overall cost for comparison is 4.8% APR.

According to the Council of Mortgage Lender’s latest figures, 48% of borrowers took out a fixed-rate mortgage in June – the highest proportion this year.

Yet new data released from John Charcol reveals that three quarters of borrowers opted for a variable rate mortgage in July.

James Wright, marketing director at Principality Building Society, said: “We recognise that the current climate coupled with conflicting economic forecasts, pose a confusing set of circumstances for borrowers. While the City predicts low interest rates for some time to come, chief economist of the Policy Exchange think tank, Andrew Lilico, recently forecasted that interest rates could reach 8% by 2012 – a move that would see mortgage repayments soar.

“This new mortgage deal offers borrowers a competitive tracker mortgage, with the option to fix in and secure their mortgage repayments for a set term, should more evidence emerge to indicate an interest rise in the near future.”

Research carried out by Principality Building Society among 600 people in Wales , revealed that just over a third (35%) of borrowers said they had already begun to make plans to cope with their mortgage should interest rates rise.

Principality’s three year Tracker Switch to Fixed is available for a maximum loan to value of 75% and a £999 product fee and an early repayment charge of 3%. For borrowers that are remortgaging, Principality will cover the cost of the legal fees and valuation fees.

Borrowers can choose to fix onto any of Principality’s rate switch fixed-rate products, without having to pay the Early Redemption Charge. The product fee for the chosen fixed rate product will still apply.

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