Interest rate relief for homeowners but will it last?

The Bank of England’s decision to keep interest rates on hold for the 25th month in a row has, as usual, split opinion.

Homeowners on tracker mortgages will continue to benefit from lower monthly repayments while savers suffer as their cash is eaten away by inflation.

There is one area that the experts agree on: a rate rise is inevitable by the end of the year.

While that may bring some relief for savers, many homeowners face a hike in their monthly outgoings.

Read more: Interest rates held at 0.5 per cent for 25th month

With a rate rise on the horizon should people on tracker mortgages be looking to stick or switch?

The experts say that depends on your circumstances.

Victoria Hartley, editor of Mortgage Solutions magazine, told Channel 4 News that the anticipation of a rate rise is, in some ways, good news for homeowners.

“I think the flurry of activity has certainly made a difference in terms of lenders pricking up their ears.”

She added: “Lenders are certainly moving into the market and showing more interest than they have and looking at competing in some areas so that’s resulting in competition and better rates for consumers.”

Stick or switch?

Depending on who you speak to interest rates could go up anytime between May and the end of 2011.

For millions of people on tracker mortgage deals that means a rise in monthly payments, so is now the time switch to a fixed rate deal?

Not necessarily according to Victoria Hartley: “People really need to look carefully at their own finances.

“People need to examine whether they can stand a rise in their repayments.”

She continued: “You can go with the safer option of the fixed rate right now and plan ahead or take a bit of a gamble because that’s what it is really.

“The differential between trackers and fixed is such at the moment that some people would suggest it might be worth taking a gamble.

“There’s still about 1.8 per cent between the average fixed rate and tracker rate so some would suggest rates might not come past that in the two years ahead.”