Tracker mortgages return, but not for first-time buyers
Tracker mortgages come back
Monday, 17, Nov 2008 04:01
Lenders are starting to bring in tracker mortgages after they deserted the market when the Bank of England cut interest rates, but first-time buyers and those with small deposits are still being frozen out.
Last week Abbey launched a tracker at 4.99 per cent with a £995 fee for loans up to 75 per cent (cost for comparison is 6.8 per cent APR), while Cheltenham & Gloucester re-entered the market with a 4.39 per cent deal with a 2.5 per cent fee for loans up to 75 per cent (cost for comparison is 5.1 per cent APR), data from broker Mortgageforce reveal.
Alliance & Leicester and Woolwich launched new rates on Friday.
Alliance & Leicester matched Abbey's rates, but only offer deals up to 60 per cent.
Katie Tucker at Mortgageforce said: "Alliance & Leicester charge a percentage fee which makes the trackers more expensive overall for loans above £49,000 although the fixed rates are worth looking at for loans under £99,500."
Halifax has also released a range of tracker mortgages now.
"These are strategically at around 0.3 per cent higher than the competition, so as to avoid a rush of rate-chasing applicants," Ms Tucker said.
Barclay's mortgage arm Woolwich is offering a hybrid deal at 3.99 per cent fixed for one year followed by a tracker of Bank rate plus 1.99 per cent, available up to 60 per cent loan-to-value (LTV).
"Bank rate could indeed go lower, but the Woolwich deal is a good choice for borrowers who don't want to gamble on that, or who prefer knowing they can budget exactly now," said Ms Tucker.
"The equivalent Abbey tracker would give the same pay rate if Bank rate fell another 0.9 per cent immediately."
She added: "The Bank of England has strongly suggested that Bank rate will be cut considerably over the next few months, so even trackers with a margin of 1.99 per cent are likely to yield a very good value rate to most borrowers.
"Unfortunately, there is little on offer above 85 per cent loan to value, so people with less equity or deposit will have to wait a little longer."
Residential fixed-rates have also improved as a result of two-year swap rates slipping to 3.45 per cent, half the level in the summer.
Up to 60 per cent LTV, Abbey has a 4.49 per cent fixed-rate for two years for an arrangement fee of £995 (Cost for comparison is 6.7 per cent APR), while Cheltenham & Gloucester offer up to 75 per cent LTV but charge a 2.5 per cent fee.
"These deals are low in comparison to the past year, and all come with free valuations and no legal fees on remortgages so may suit anyone looking to fix their payments, or concerned that the market could take an upward turn for the worst again," Ms Tucker said.
For buy-to-let landlords she suggests standard variable rate deals that don't have arrangement fees but are now so low that rental cover fits, such as Coventry Godiva at 5.34 per cent variable rate available to 65 per cent LTV, with early repayment charges until 2013.
Find market leading mortgage rates using our best buy tables.
