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Tracker mortgage rates 1.66% over base rate

Friday, 14 November 2008 1:04 PM

Tracker mortgage rates are starting to fall but they are still 1.66 per cent over the Bank of England base rate.

The Bank of England's 1.5 per cent interest rate cut led lenders to withdraw their tracker mortgages- but the top five lenders are now filtering tracker mortgage deals back.

However, research by mform.co.uk shows trackers are now tracking at 1.66 per cent over the base rate - and coming with £739 fees.

In October 2007 the tracker gap was 0.3 per cent.

However, Francis Ghiloni at mform argues recent reductions in the interbank lending rates and the base rate cut point to further falls in tracker rates.

"The return of tracker products to the market is welcome news and shows that the Bank of England shock rate cut is starting to work," he said.

"But we are still a long way from normality in the mortgage market which increasingly looks divorced from reality.

"In the past a tracker mortgage meant you'd pay base rate or a rate close to it. Now lenders charge a premium for what has traditionally been a popular product."

He added: "For confidence to return to the market lenders have got to more closely reflect the Bank of England base rate. Otherwise it looks like they are improving their margins and not helping customers."

Early in the week there were just eight trackers on the market - now there are more following the decision of Abbey, Lloyds TSB and Alliance & Leicester to return to the tracker market. Trackers from Nationwide and Halifax have still to be announced.

Average rates on trackers were 6.056 per cent in October 2007 when the Bank of England base rate was 5.75 per cent and were 5.950 per cent when the Bank of England rate was five per cent.

Since last week's 1.5 per cent rate cut the average is 4.66 per cent.

In October 2007, lenders were charging base rate plus an additional 0.306 per cent meaning that the average rate came to 6.056 per cent.

By March 2008 when the base rate had been cut by 0.5 per cent to 5.25 per cent average rates dropped slightly to 5.950 per cent, but the charge above base rate increased to 0.598 per cent.

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