Now is the time to snap up a tracker rate

Article source: Elaine Moore -

Now is the time to snap up a tracker rate

Mortgage borrowers have been recommended to sign up to available tracker deals fast since some of the best offers have and will be pulled from the mortgage market this week. Mortgage lenders reacted fast to the Bank of England’s decision on Wednesday of this week to reduce the base rate by half a percent to 4.5 percent by doing away with the some of the most eye-catching tracker rate mortgage products.

Halifax, Standard Life, Lloyds TSB and Cheltenham & Gloucester have all withdrawn their tracker products mortgages as a result of the bank’s move. Earlier on, Woolwich, Yorkshire Building Society and Abbey revised their tracker rate offers.

Currently, according to the best variable tracker rate is 5.44 percent offered by HSBC, with a £499 arrangement fee.

This will mean a good harvest for those already on a tracker mortgage. Facts from reveal that a mortgage customer with a standard £150,000 tracker product will be more than £40 better off per month.

Mortgage brokers say that tracker products are becoming increasingly expensive because mortgage lenders are under pressure to hike their margins between the cost of funds and what they charge on mortgages. The difference between the base rate and the London Inter-bank offer Rate has been at constant high meaning banks are paying a premium to acquire money to lend to consumers.

Ann Robinson at said that up until this rate depreciates, mortgage lenders will struggle to offer cheaper mortgage products. She however said that fixed rates are expected to fall though at a slower pace.

Besides that, Melanie Bien the director at Savills Private Finance says there is an expected slimming in the gap between average fixed-rates products and the base rate. She nevertheless cautioned homeowners not to anticipate a full half a percent drop. Meanwhile, the best two-year fixed-rate on the market presently is 5.49 percent offered by Market Harborough, with a £595 arrangement fee.

According to David Hollingworth at London & Country Mortgages the change to the base rate should help to stabilise the mortgage market.

Erratic swap rates have led to a number of fixed-rate swells in the past two weeks following a period in which they seemed to be falling. Swap rates indicate the movement of fixed mortgage rates. Mortgage brokers foresee a fall in both short and long term rates since the swap rates have depreciated to fewer than 5 percent.

A senior technical manager at brokerage firm, John Charcol, Mr. Ray Boulger, says there will still be a difficulty in finding a deal, for those seeking to borrow more than 75 percent of the value of their property. He adds that though the interest rate cut is expected to lead to lower mortgage rates, it is improbable to make banks more willing to relax lending regulations.

A number of buy-to-let mortgage lenders including Bristol & West Mortgages, Intelligent Finance and Newcastle Building Society reduced their mortgage assortments, particularly sub-prime, self certification and mortgage products with high LTV’s after the Bradford & Bingley’s painful exit from the mortgage market.

Those having low levels of equity are by now paying a premium of up to three quarters of a percent and are fighting hard to find deals 2 year fixed rates deals of the sort that were available two years ago.

On the other hand mortgage providers are targeting those who wish to secure their mortgage repayments over a considerable period of time. Abbey (a subsidiary of the Santander Group) has lowered rates on its five-year fixed-rate mortgages from 5.89 percent to a not-so-low 5.79 percent together with its arrangement fees by more than £500 to an amazing £995.