Tracker mortgages: New charges

Two mortgage lenders have hiked early repayment charges (ERC) on loans in a bid to retain customers beyond the turbulent period facing the market.

Lloyds and Woolwich have both slapped one per cent ERCs on their term trackers, which were originally free of the charges.

ERC-free products mean borrowers face no penalty if they decide to overpay or pay off completely their mortgage before the end of the term.

Katie Tucker, technical manager at mortgage broker John Charcol, said term trackers were usually ERC-free and remained so with most lenders.

However, she thinks the move by Lloyds and Woolwich is a clever tactic. Ms Tucker said: "[It's] a pricing strategy for keeping the rate low, and also ensures borrowers aren't signing up just to ride out the storm for a year, only to abandon the lender when fixed-rates look rosier."

Borrowers looking for the best deals this week have been advised by John Charcol to check out First Direct's two-year fixed-rate mortgage which currently has a rate of 4.75 per cent and is available for loans of 90 per cent of the property's value. There is a fee is £1,498.

The broker also highlighted Cheltenham & Gloucester's tracker rate which is currently at 4.78 per cent plus the bank rate, minus 0.67 per cent. It's available for loans of up to 90 per cent of the property's value and requires an up-front fee of £99 plus a 2.5 per cent rate added.

The Cheshire also has a tracker deal which provides loans of up to 95 per cent of the property's value – a rare product in a market which is fast withdrawing high loan-to-value mortgages.