The Best Fixed Rates And Trackers

Following the Base Rate cut, a raft of cheap mortgage deals have been announced. Christina Jordan rounds up the best currently available.

Following the furore over almost every tracker deal being pulled from the market last week, lenders have been slowing creeping back with their new deals.

As expected they are priced at a wider margin than their previous incarnations, but because of the Base Rate cut, payrates are still lower. As long as you have enough equity in your home or a big enough deposit, that is -- otherwise trackers are simply not an option.

Who has launched what?

Full marks to HSBC for not pulling its lifetime tracker at Base Rate plus 0.99%, which dropped to 3.99% following the rate cut -- and it comes with a reasonable £799 fee. For some time it was the only tracker in town, and it is still the cheapest for those who want a lifetime product rather than a shorter deal.

However there is one drawback - you can only borrow up to 60% of your property's value (known as `60% loan-to-value or LTV). So you need a 40% stake to access this deal.

HSBC is expected to launch a fuller range of trackers, which will hopefully cater for first-time buyers and those with lower levels of equity.

Alliance & Leicester's new tracker rate is available from today at 4.89%. The two-year deal of Base Rate plus 1.89% comes with a chunky 1% arrangement fee, an expensive fee option for those with larger loans.

Abbey launched two two-year trackers on Wednesday, available on loans up to £250,000.

• 4.89% with a £499 fee for 60% LTV
• 4.99% with a £995 fee for 75% LTV

But it was Lloyds TSB and C&G that launched the fullest range of trackers this week, with the keenest two-year prices. However, note that their cheapest rates come with hefty fees, so the Abbey deal might actually work out better for some borrowers.

The lenders have three rates available up to 60% LTV:

• 2 year tracker at 4.79% with a £1,995 fee
• 2 year tracker at 4.89% with a £995 fee
• Term tracker at 4.85% with a £995 fee

And five new trackers are available in their 75% LTV range

• 2 year tracker at 4.79% with a £1,995 fee
• 2 year tracker at 4.99% with a £1,995 fee
• 2 year tracker at 5.09% with a £995 fee
• 2 year tracker at 4.39% with a 2.5% fee
• Term tracker at 5.05% with a £995 fee

All of these deals fall into the lenders' All Weather category, allowing customers to switch to a Lloyds TSB or C&G fixed rate product at any time during the deal without incurring early repayment charges.   

There is another similarly priced tracker on offer exclusively via mortgage intermediaries -- Bank of Scotland has a five-year tracker rate at 4.99% (Base plus 1.99%) available up to 60% LTV with a £999 fee. BOS will lend up to £500,000 so it's a decent option for those needing larger loans.

But how good are these deals?

While the rates are lower than their predecessors, they are not 1.5% lower. In other words, the margin has widened between Base Rate and tracker payrates since the 1.5% Base Rate cut last week.

But they are still attractive enough rates for those lucky enough to have enough equity or deposit to qualify for them.

What if you have less than a 25% stake in your property? The highest LTV tracker I could find is from the Derbyshire Building Society at 80% LTV, but it is Base Rate plus 2.99% -- currently 5.99%. So not the best rate in the world. but not the worst, either!

But a 20% deposit may still be out of your reach. After all, on a typical £160,000 property you would still need to be able to put down £32,000.

This lack of products at high LTVs clearly needs to change and hopefully more deals will be introduced that a wider range of borrowers can actually access. Only a handful of lenders have yet returned to the tracker market, so another week or two will no doubt make a big difference.

For first-time buyers with smaller deposits, and indeed remortgagors with only a small amount of equity in their property, trackers are not an option.

Fix it

But if you are open to the option of fixing your rate at a set level for the forseeable future - despite widespread predictions that there will be further Base Rate cuts -  then there are deals available with just a 10% deposit.

The best are a fee-free two year fix from Britannia at 6.54%, a three-year fix with a £299 fee from Nationwide at 6.59% and a two-year fix from HSBC at 6.44% with a fee of £599.

Not exactly cheap but some of the best on offer.

For those with a bigger deposit, fixed rates have started to come down in price. Alliance & Leicester has launched a new two-year fixed rate at 4.49% with a 1% product arrangement fee up to 60% LTV.

Abbey has cut its two-year fixed rates, but these tempting rates come with high fees:

• 4.49% with a £995 fee for 60% LTV
• 4.54% with £1,499 fee for 70% LTV
• 4.79% with a £995 fee for 75% LTV.

As yet, fixed rates have not come down adequately to reflect the falling costs of swap rates (which reflect lenders' borrowing costs). Two-year swap rates have fallen to 3.61% but average two-year fixed rates are still up at 6.13%, an excessive 2.52% margin, according to recent research.

It is likely that we will see more fixed rate cuts over the next few weeks. Holding on  and waiting could make a huge difference to your mortgage options. For remortgagors, it could be worth going onto your lender's SVR for a temporary period before choosing from a wider selection. But, of course that all depends on what your lender's SVR is..

More: How Will The Base Rate Cut Affect Your Mortgage?

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