FlightMan

MORTGAGE lenders have more than tripled the margins they charge on tracker deals during the past three months, latest research shows.

Despite a record low official interest rate of just 1.5 per cent, hard-pressed home owners are being forced to pay 4 per cent on their borrowing.

Last October, when the Bank of England base rate was five per cent, the average margin on a new tracker mortgage was 0.76 per cent. But margins have since risen to an average of 2.36 per cent above the base rate, according to moneysupermarket.com.

The price comparison website warned that, with the base rate so low, an initial rate of 3.86 per cent does not look expensive, but borrowers could run into problems if interest rates rise.

Louise Cuming, its head of mortgages, said: “Trackers have become the ultimate ‘handle with care’ mortgage.

“Those who took the plunge with a tracker in October will now be paying about 2.26 per cent interest – a stunning piece of good fortune.

“But if the historically low rate triggers a savings or currency crisis and it, is forced to increase rates, new tracker customers will be left exposed.”

She said each base rate reduction by the Bank was leading to lenders ncreasing the margins on tracker deals because they could not afford to drop their rates any lower.

Rather than helping first-time buyers and people remortgaging, the base rate reductions were potentially storing up problems.

Ms Cuming said: “Borrowers thinking of taking out a tracker mortgage need to ensure they would be able to afford higher repayments if rates start heading back up.

“Those concerned by this need to consider getting a fixed mortgage – potentially at a slightly higher rate, but with longer-term security.”

Meanwhile the Government was yesterday urged to force Northern Rock to offer mortgages to people on lower incomes now it has been nationalised.

The National Housing Federation chief executive David Orr said: “Northern Rock should be made by ministers to take on a social purpose and ensure that those people on low-to-moderate incomes who can afford to buy a low cost home and have a good credit rating, are given access to mortgages."

I thought mortgaegs being offered to people on low incomes was one of the reasons we got into this mess?


Of course, those on who who have been saving several £hundred a month will be OK, as you're all over paying by that amount aren't you.

austinwrx

probably about time to have a "what mortgage" thread.

I'm lucky I guess. I have a very small mortgage and not a debt/loan to my name. Standard variable rate- not a tracker, following a good deal coming to an end. Its currently at 5.00%- I can repay it with no charges etc. I am overpaying it currently anyway.

I think, remembering back, interest rates may hit 15-17% again like they did 89/90 etc. Hence thinking fo protecting myself.

Is it worth tying into a fixed rate: for example the C & G are offering tracker up to 4.99% until 2019. because of base rate the interest rate is actually 3.5%.

any good advice out there, because genuinely I just do not know much about mortgages. Thanks

FlightMan

Where's FastBloke when you need hi

T5OLF

iTrader: (4)

I just moved off my 4.2 fixed for 5 year deal onto a .79 above base tracker with HSBC. Set up cost was 600 notes with no tie in's.

Still paying the same amount as I was before so nice litter over payment going on

al4x1

the big question is who would go for a tracker at those rates with the interest rate where it is? you can't blame the banks for charging sensible rates for them as they know rates could stay this low for a fair while or even drop further.
Personally i'm just enjoying mine and putting the extra cash into renovating the place.

Diesel

>>“Those who took the plunge with a tracker in October will now be paying about 2.26 per cent interest – a stunning piece of good fortune.<<

Down from a grand to £350 a month - I LOVE October and Northern Rock getting it all wrong back then, forcing me to switch lender. I'm alright Jack!!!

D

TelBoy

Fast bloke...



Tracker mortgages are usually collared, that's not new information, what IS new is that the collars are rarely invoked. On the upside, Bank rates would have to increase by quite a bit before borrowers would be hit with higher costs, in theory at least. If you sign up to the UK recession being longer than a brief downturn, as i do, then a tracker mortgage could still be the cheapest option over the next 2 to 3 years.

austinwrx

interesting. Thing is, I was only paying £364 before- still am- so its nicely overpaying in any case.

If anything because its so little each month, I've ignored sorted out getting a better deal.