People coming to the end of a deal are being urged to consider their options
It could be an option worth considering(Image: courtneyk via Getty Images)
Homeowners coming to the end of their mortgage deal are being urged to consider a lesser-known option that could give them breathing space, as the Iran war keeps markets on edge and rates unpredictable. The conflict has pushed mortgage costs higher and higher since it started on February 28, with lenders hiking rates sharply and pulling deals as energy prices surge and inflation fears grow.
That has left many borrowers facing a tough choice – whether to lock in now at higher rates, or gamble on waiting. But there may be a third option.
Instead of jumping straight into a fixed deal, some brokers say switching to a tracker mortgage could buy valuable time. Tracker deals follow the Bank of England base rate, but crucially, many come with little or no Early Repayment Charges (ERCs).
That means borrowers can switch to a fixed rate at any point – if and when the market improves. In simple terms, it’s a “wait and see” strategy in a volatile market.
Co-operative Bank currently offers a 4.34% tracker at 60% LTV and 4.64% at 70% LTV, both featuring no ERCs. Barclays follows closely at 4.75% (70% LTV), also with no ERC. The best fixed rates, on the other hand, are currently priced at more than 5% across the board.
Justin Moy, MD at Chelmsford-based EHF Mortgages, said this approach was becoming increasingly relevant.
He added: “This is more about the experienced broker helping borrowers with a short-term solution, as most borrowers will not be aware of this approach. Many lenders have tracker options that have little or no Early Repayment Charges, so the ability to switch to a fixed deal at a much later date could be a good option, but this is all subject to individual circumstances.”
The stakes are high. The Iran conflict has driven up oil prices, feeding into inflation and making interest rate cuts less likely.
Some experts are warning that rates could stay higher for longer or even rise further. That uncertainty is exactly why flexibility matters – but Moy warned borrowers not to be blinded by low headline rates.
He said: “You also have to watch the product fees, as getting the cheapest trackers may incur a product fee, and you’ll end up paying another one if you also want the cheapest fixed deals.”
The strategy may be especially useful for those with larger mortgages, where even small rate changes can mean hundreds of pounds a month.
Moy added: “It is a way forward for those with larger mortgages in particular and is worth looking at.”
Darryl Dhoffer, founder at Bedford-based The Mortgage Geezer, said: “With mortgage rates climbing following the conflict in Iran, savvy borrowers are dodging long-term locks in hopes of a future dip.”
Martin Rayner, director at Compton Financial Services, said locking in a high fixed rate now could be a mistake with so much uncertainty.
He added: “Some borrowers are using trackers as a short-term strategy, planning to switch to a fixed rate if rates fall. This can work well, particularly with a no Early Repayment Charge deal, as it allows you to move without penalty.
“The downside is you remain exposed to further increases. While the lowest tracker rates often have fees of around £999, if used short-term (less than 6 months), a no-fee option is often more cost-effective, especially below £500,000.”
Dariusz Karpowicz, director at Doncaster-based Albion Financial Advice, said there was a lack of knowledge about tracker mortgages.
He added: “Most first-time buyers have never even heard of tracker mortgages, which is a shame because right now they could be a genuinely useful short-term play. With rates shifting fast off the back of geopolitical tension, a tracker with no Early Repayment Charges lets you sit tight on a lower rate and switch to a fixed deal once the dust settles.
“The catch? You carry the risk if rates climb further, and watch those product fees; paying one now and another when you fix could eat into your savings. Personalised advice from a good broker is everything here. Your circumstances dictate the strategy, not the headlines.”
With global tensions continuing to rattle markets, flexibility could be just as valuable as the rate itself.