Although the Bank of England moved to hold interest rates at 4.5 per cent recently, speculation is mounting that a quarter point rise will be enacted before the start of 2007.



However, Moneysupermaket argues that those currently looking for mortgages should not automatically discount the idea of a tracker mortgage, where repayments are dependent on the interest rate, as rates have also risen in the fixed rate mortgage sector.

The cost of a fixed rate mortgage has already risen by an average of five per cent since August last year (2005), despite the bank freezing the underlying cost of borrowing. Moreover, wider influences in the financial market mean further increases are likely.

Assuming that the interest rate remains around 4.75 per cent for the next couple of years, Moneysupermarket argues that it would be silly for home buyers to automatically opt for a fixed rate mortgage, as better bargains can often be found in the tracker market.

It's not always as clear cut as fixed mortgage or tracker mortgage, Moneysupermarket's Louise Cuming was quoted as saying recently.

What people should be asking themselves is whether they are already at the top level of affordability when it comes to their monthly outgoings. If so, and if even a small rise in base rates would stretch this, then they would be wise to opt for a fixed rate mortgage, she recommended.

Ms Cuming continued to say: If they have some leeway available in their finances then they would be better off with a tracker mortgage because, ultimately, all the pointers indicate that rates are unlikely to rise significantly in the next two years.

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