As the Bank Rate has not moved since March 2009, the advantages of a variable rate mortgage are not as obvious as they once were. Has ING indulged in a gimmick, or is it tapping into a hidden demand for variable rate mortgages?

For this week’s Marketwatch, our commentators are:

Charwin Private Clients director Ranald Mitchell, who argues ING’s latest product may dazzle but is of limited use to mortgagers

Moneysupermarket editor-in-chief Clare Francis, who says the product is up against an attractive crop of fixed-rate deals

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Chadney Bulgin mortgage partner Jonathan Clark, who thinks the offer is as up-to-date as his CD collection

Ranald Mitchell, director, Charwin Private Clients

ING’s launch of their market dazzling tracker rate is likely to be the last push the lender will make in the mortgage market following their takeover by Barclays. The product itself is of limited use though to mortgagors, and will not benefit the wider market or the average consumer.

The ING tracker rate is available up to 60% LTV and has unattractive product fees of £195 on application and £1,750 either added to the loan or paid separately. Any consumer who is to benefit from the rate in isolation would need to have a balance in excess of £350,000 to justify the fees. In contrast to ING’s rather attractive two-year fixed rate at 2.29% with a total of £495 fees, the tracker offering ought to appeal to the more sophisticated consumer, likely high net worth, high mortgage balance.

Most consumers are still looking to benefit from longer term fixed rates and I cannot see that the ING tracker rate will be particularly sought after other than high-end borrowers.

The demand for variable rates continues to remain low. The 60% LTV bracket is saturated. The only place in the market for any variable rates to impact and attract consumers is in the upper LTV bandings where we need them to start a pricing war.

Clare Francis, editor in chief, Moneysupermarket

Given where fixed rate mortgages are at the moment, it seems perhaps surprising that ING Direct has chosen to launch its new two-year tracker.

The rate is 1.94% – 1.44 percentage points above the Bank of England base rate – which on the face of it looks attractive and given the outlook for interest rates many borrowers would be happy to go for a variable rate.

However, set against the current crop of leading two-year fixes demand for this product is likely to be subdued, particularly as the fee is also some way off the mark. At £1,945, the set up costs are high.

Yorkshire Building Society’s brands are dominating the best buy fixed rates. Last week it launched the lowest ever two-year fixed rate at 1.89% under the Chelsea Building Society brand, and a 1.94% deal under the Yorkshire brand. It also has a 1.99% two-year fixed via Norwich & Peterborough. All of these options work out cheaper over two years than ING’s.

Therefore, why go for a variable rate when you can benefit from the security of a fix and pay less?

Certainly demand has shifted as fixed deals have come down in price. This time last year around 40% of borrowers were opting for variable rate mortgages; it is currently less than 10%.

Jonathan Clark, mortgage partner, Chadney Bulgin

I’m a bit surprised at ING’s move to launch such a competitive product and undercut its competitors by such a small margin – it’s just the sort of ‘stop me and buy one’ deal that we used to see advertised in high street bank windows a few years ago.

Doubtless it will generate hits on their website but we’ve spent years warning consumers about the dangers of lender-controlled SVRs (just look at Santander’s 0.5% rise last year) and the benefits of more transparent tracker deals so this type of deal looks about as up-to -date as my CD collection.

My clients generally ask for fixed rates or lifetime tracker/offset type products at the moment, not this type of rate although it will suit certain customers.

I don’t expect to see a flood of such deals in the near future. I’m getting far more excited about the plethora of sub 3% five-year fixed rates that for most people, make a lot more sense. Rates can only go in one direction…