Would you opt for a tracker mortgage if interest rates are set to go up in 2018?

The number of homeowners opting for a variable rate when they remortgage has plummeted 75 per cent over the past year as the Bank of England was tipped to raise interest rates - and then did.

But with the Bank having outlined that base rate should continue to climb in 2018, why would you opt for anything other than a fixed rate now?

It might seem an odd move but there are still some reasons why borrowers would take out a mortgage that could rise rather than locking into a fix.

Over the past 12 months demand for fixed rate deals surged as warnings from the Bank of England stepped up, ending with a quarter point rise in the base rate in November.

Markets and economists are pricing in at least one further 0.25 per cent rise early in 2018, which would take the official rate up to 0.75 per cent from the current level of 0.5 per cent.

According to conveyancing firm LMS, one in five homeowners looking to remortgage onto a new deal this time last year opted for a variable rate. Now, just one in 20 homeowners is choosing flexible rates with the remainder locking into fixed rate mortgages.

Nick Chadbourne, chief executive of LMS, said: 'Consumers were correct – 78 per cent of borrowers identified that a rate rise was likely, and many smartly capitalised on the situation. 

'This activity drove remortgaging volumes to peak, with the highest remortgage numbers since 2008.'

LMS’ figures show October’s remortgage market was the second busiest since the financial crisis, with 40,590 remortgage transactions and over £7billion lent.  

Longer-term fixed rate deals have become increasingly popular with demand for five-year fixed deals making up a record 50 per cent of all of October’s remortgage transactions, more than double the 19 per cent seen in the previous year.  

'As the Bank of England hints at a long stretch of rises I suspect many more consumers will opt to fix deals while rates are rock bottom,' said Chadbourne.