There are winners and there are losers in the current crazy mortgage market. It’s easy to spot the difference. Here’s our run down of what’s going on.
By Caroline Bloor
Tracker Mortgages
If your mortgage deal tracks the Bank’s base rate, you will have reaped the benefit of the last three cuts and saved yourself a small fortune in your monthly mortgage repayments. Whether you will benefit from the latest cut will depend on whether your tracker has a minimum rate clause (aka ‘collar’). But for those whose deal tracks below the base rate without a collar, mortgage interest payments could fall so far they disappear in a puff of smoke.
If you’re a tracker customer, look at your mortgage documents to check whether there’s a ‘collar’ on how low your rate can go before you crack open the champagne.
Not surprisingly, anyone wanting to take out new tracker mortgage may have problems finding one. But don’t give up hope. A number of lenders withdrew their tracker mortgages after the November cut in base rates for repricing but are expected to re-launch them fairly soon.
There’s been a great deal of anger at the banks’ and building societies’ failure to pass on the full benefit of the base rates cuts to their standard variable rate customers. Some lenders have been more generous than others. ‘With each base rate cut, the number of lenders passing the cut on in full to their SVR continues to dwindle...it is likely that some lenders have already cut rates as low as they are prepared to go,’ says Michelle Slade, analyst at Moneyfacts.
About eight per cent of existing mortgage holders are on the standard variable rate mortgages. Those that can are voting with their feet where they are able to find a better deal. But to be attractive to another lender you need a fairly high level of equity.
If you are on a fixed rate mortgage, there’s no point agonising over rate decreases. Your interest rate is fixed so worry about something else instead. Console yourself with the fact that at least you know exactly how much you will be paying every month. Also, you are not alone – around 71 per cent of mortgage holders are currently on a fixed rate, according to the Council of Mortgage Lenders.
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