A tracker mortgage could be the best option for the brave — but only if you think interest rates are nearing their peak.

Variable rates are set to increase again after the Bank of England raised its base rate for the 14th time since December 2021 on Thursday. At 5.25 per cent, the base rate is at its highest level since February 2008.

The 1.4 million households on a variable rate mortgage deal will feel the pain first as these rise in line with the Bank rate. But they may still be better off in the long run than those who lock into a fixed rate now.

Experts say we are now at or near the peak of rate rises. The latest forecasts from the Bank are lower then they were a few months ago, suggesting a peak of 5.5 to 5.75 per cent rather than 6 per cent.

Ashley Thomas, from the mortgage broker Magni Finance, thinks a two-year tracker deal could be the sweet spot because he expects the Bank rate to drop over the next couple of years.

“The risk is whether it will continue to rise beyond the next three to six months, or if we are at the peak and it starts to reduce by the end of 2023,” she said. Capital Economics thinks the Bank rate will be 5.5 per cent next summer, after which it will slowly fall to 3 per cent by 2026.

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