Lenders Increase Rates On Tracker Mortgages
Recent research carried out within the mortgage sector has revealed almost a quarter point rise on tracker mortgages. Despite the Bank of England's decision to cut the base rate a second time to 5.25%, many lenders are failing to pass on this total decrease of 0.5 % to their tracker mortgage rates.
In theory, tracker rates are designed to follow the base rate and therefore rise and fall accordingly. But following the impact of the credit crunch on both the economy and inflation, lenders are either opting to raise their tracker rates or simply refuse to lower them. It is estimated that some tracker rates have increased by as much as 0.23%.
In December last year, Lloyds TSB was charging some of their tracker mortgage borrowers up to 6.11%. Following the quarter point drop in base rate for the same month, Lloyds TSB dropped their tracker rates accordingly. However no sooner had tracker rates been reduced, it was not long after until they were once again raised to 6.34% taking them a whole 1.09% above the Bank of England's base rate.
As for Nationwide Building Society, one of the UK's largest mortgage lenders, their 90% loan-to-value tracker loan has practically remained unchanged. At the beginning of the year 2008 it stood at 5.58% and was increased to 5.68% two weeks before February's base rate reduction. In a move to appear compliant with tracker mortgage rules whilst at the same time avoiding any loss, Nationwide then cut its tracker rate back to 5.58% following the Bank of England's rate cut.
A spokesman for an online mortgage lender said, "The Bank of England rate cuts are not feeding through to borrowers with trackers as lenders re-price."
He added, "It has been argued that a 0.5% rate cut this month was the minimum needed to help both borrowers & lenders and analysis shows that another cut is needed."
Published on February 18, 2008
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