Tracker mortgages are back with a bang!

More than 30 lenders withdrew their various offers of tracker mortgages from the market citing reasons of re-pricing. However, the surprise cut of base rate by 1.5% has forced many lenders to increase their margins by two-fold on tracker mortgages and starting this week, many banks and mortgage giants have reintroduced tracker deals for existing home owners. For example, Halifax, UK’s largest lender has reintroduced its two-year tracker deals for individuals who have a deposit of 25% at a rate of 5.14%, or 2.14% above base. Homeowners who have a 25% deposit with Mortgage major Lloyds TSB can hope to pay 2.09% above base. Last week, Abbey’s two year tracker was 1.29% compared to the current 1.99% above the base rate.

A tracker mortgage is a very commonly used product in the UK and is nothing but a loan secured against a real estate property and the interest that is charged promises to have a definite relationship with the base rate of Bank of England. Tracker mortgage rates are usually cheaper than fixed or flexible rate mortgage. However, the unique part of tracker mortgage rate is that even though the cost of a tracker mortgage dips with falling interest rates, it does not guard the owner against rising interest rates.

When it comes to remortgaging, individuals get mostly attracted to cheap mortgage rates which in most of the times happens to be a discount or tracker mortgage. However, there is a subtle but important difference between tracker mortgage rate and discount mortgage. While discount rates are connected with the standard variable rate of the mortgage provider, a tracker mortgage is linked with the base rate of Bank of England. A tracker mortgage mirrors the current financial situation and its interest rates are cheaper than fixed mortgage rates.

If you are looking for small payments at the early stages and willing to take the risk of higher payments in the future, then tracker mortgage are best suited for a person like you. However, like all loans, you must read the fine print before opting for tracker mortgage. If the interest rate is set well below the base point for 2 years, you can have some lenders stating that they will assess the situation once the base rate falls too low or some even mentions that you have to a pay a minimum rate if the interest falls much below expectation. Such conditions defeat the entire purpose of opting for a tracker mortgage.

You have to be intelligent to know when to go in for a tracker, fixed or capped rate option. At a time when chances of base rate falling are very high in 2009, it would be only but foolish not to opt for a tracker rate mortgage. As a borrower, you can also look for trackers that provide a drop lock choice which enables you to move to a fixed rate any time you wish. So now is the right time to opt for tracker mortgage rate with interest rates falling sharply.

By Nancy Dodds of Financemate.co.uk

Fixed rate mortgages increase again

Mortgage lenders Bradford & Bingley, First Direct and the Co-Operative Bank have all increased the cost of their fixed rate mortgages today.

Bradford & Bingley fixed rate mortgages have increased by 0.5% and 0.7%. First Direct increased its 2 year fixed mortgage by 0.16% to 6.15% and Co-op raised its 3 year fixed rate mortgage product by 0.7%.

Mortgage lenders are still finding it difficult to aquire funds that they can lend at reasonable terms. As the cost of aquiring mortgage money on the money markets stays high, so does the fixed rates they relate to.

Unfortunately there is no quick fix for this problem and rates will return to a more normal level when confidence and liquidity returns.

As always, we would recommend anyone seeking a mortgage for a fixed rate or other interest rate seek advice from a qualified mortgage broker who can compare the mortgage deals on offer. We are suggesting for some clients that they wait for normality to return and then secure a cheaper deal.

Fixed rate mortgages more popular

The Council of Mortgage Lenders (CML) has just advised that mortgage borrowers are increasingly favouring a fixed rate mortgage. Borrowers taking out fixed rate mortgages increased to 59% in April 2008 from 54% in March 2008.

Having a fixed rate mortgage means that you know exactly what your mortgage payments will be for a set period of time. This makes budgeting much easier. It is very common for a first time buyer to choose a fixed rate mortgage as they find it useful whilst getting used to paying a mortgage each and every month.

The upside to a fixed rate is your mortgage payments stay the same whilst others may increase if interest rates go up. Conversely, if interest rates fall then you will still pay your fixed amount each month.

Fixed interest rates can be selected over a range of time periods such as; one year, two years, five years, ten and 25 years. Nearly all fixed rate come with early repayment charges (ERC) which means that if you pay off all or part of the loan during the ERC period then you will need to pay a penalty. As ERCs are normally linked to the mortgage amount this could add up to a substantial sum of money.

It is difficult to know what type of interest rate is right for you; fixed, tracker, discount?  We would always recommend seeking the advice of a mortgage broker who can then search the mortgage market to see what interest rates are right for your circumstances.

Mortgage lending rises in April 2008

The Council of Mortgage Lenders this week announced that mortgage lending rose by 8% in April 2008.

The monthly increase came after 2 months of declining mortgage lending but the overall figure of £26.1bn is still below that of April 2007. 42 per cent of the lending was from remortgages as large numbers of mortgage customers come to the end of their fixed rates. More people are now opting for a fixed rate than a variable or tracker interest rate.

Northern Rock borrowers to be offered Lloyds TSB deals

It was recently announced that Lloyds TSB has struck a deal with Northern Rock and will be offering mortgages to those Northern Rock borrowers whose deal is ending.

What is not widely known is that Lloyds TSB will be allowed to cherry pick the best borrowers, leaving the rest to fend for themselves. We feel this is unfair for 2 reasons; first Lloyds TSB only offers their own products which are not always competitive. Second what happens to all the other Northern Rock borrowers who Lloyds TSB don’t want. We could argue that these people need advice the most. They are going to have high loan to value mortgages and possibly some bad credit as well.

Northern Rock are not offering competitive deals to existing customers and are happy for them to go elsewhere.

As always, we recommend Northern Rock mortgage customers seek advice from a mortgage broker who can look at all the options from the whole of the mortgage market. There will be better deals available that are cheaper than the Lloyds TSB offerings.