While the Bank of England base rate has now been held at 0.5 per cent for seven years, Moneyfacts analysis shows the average two-year tracker mortgage rate has increased by 0.06 per cent since November.
Charlotte Nelson, a spokeswoman for the consumer finance website, said this proves the link between the interest rates and mortgage has been broken.
She explained this could be due to external economic threats – unemployment, wage increases and a decline in interest in this type of mortgage.
The percentage of tracker mortgages taken up has fallen from 9 per cent to 7 per cent in just one year, according to the Council of Mortgage Lenders statistics from the end of March.
Ms Nelson said: “This suggests that the appetite for this type of product has waned in favour of deals that boast greater security. As a result, lenders have begun to focus more attention on the fixed-rate mortgage market, leading to declining tracker mortgage product numbers and fewer low-rate deals.”
Average Two-Year Tracker Mortgage
Lowest Two-Year Tracker Mortgage
Average Lifetime Tracker Mortgage
Number of Variable Tracker Mortgages
She pointed out that tracker mortgages do still have some advantages, such as no early redemption charges, which gives borrowers flexibility.
“Tracker mortgages may also prove cost-effective over a shorter term; for example, borrowers would be £595.92 a year better off if they opted for the average two-year tracker mortgage compared with the average two-year fixed-rate deal, which currently has a rate of 2.54 per cent,” said Ms Nelson, noting that this was based on a £200,000 mortgage over a 25-year term on a capital and interest repayment basis.
“A key question for any borrower when considering such a deal is whether or not they could handle a rate increase if the base rate were to rise.”
Andrew Montlake, director at Coreco Mortgage Brokers, said: “Even though the likelihood of a base rate rise has diminished, even a small rise would have a disproportional effect at this time, so the insurance a fixed rate provides is welcome for many borrowers, especially at a time when two, three and five-year fixes look such good value.”