In the early months of last year, when interest rates were falling at a significant rate and eventually reached their record low level of just 0.5% per cent, a large number of people believed that this low interest rate on loans would be short lived and as a result of this, around 80 per cent of all home owner loans and mortgages were taken out on a fixed rate basis, allowing borrowers to lock into a cheap loan rate before prices increased.

But almost one year later, the base rate of interest has remained at the same low level and due to the high premiums placed on many fixed rate loan deals by lenders, this type of home owner loan now seems like an expensive option.

It is therefore of little surprise that the latest home owner loan survey from Legal & General has revealed that there has been a sharp move from borrowers taking out a fixed rate loan and moving towards tracker deals, offering significantly lower rates.

The survey found that there has been a shift away from fixed rate loans on both residential home owner loans and buy to let loans, with 43 per cent of all residential loans and 57 per cent of all buy to let loans being taken on a tracker basis during the last three months of last year.

Stephen Smith of Legal & General said “There has been a distinct shift towards tracker rates, most likely because fixed rates are looking relatively expensive and because fears of imminent base rate rises are receding.”

“Most commentators are still expecting the base rate to stay low for some time to come, so this is a golden opportunity for people to think about paying off some of their loan debt. The low interest rate environment has led to a fair bit of innovation in tracker products, what with capped trackers, reverse stepped trackers and lifetime trackers all featuring recently.”