Six Marvellous Mortgage Trackers

Are you eligible for one of the best remaining tracker deals?

The Bank of England surprised everyone last month by abandoning its previously cautious approach and slashing Base Rate by a massive 1.5%. The cut had followed a significant 0.5% decrease in October, meaning that Base Rate plummeted from 5% to 3% in the space of two months.

Mortgage lenders were quick to react and virtually all tracker deals were pulled from the market in the space of a few days. Indeed some lenders were even quicker off the mark - pre-empting the rate cut by withdrawing or repricing their deals in advance of the Bank of England's decision.

At the time I encouraged Fools who wanted to get a tracker to move quickly to bag a cheap deal , but I didn't think that lenders would react so forcefully. For a week or so, HSBC was the only significant tracker provider left in the market.

Lenders pulled tracker deals because their own funding costs, while falling, were not dropping at the same speed as the Base Rate, so the November cut would eat directly into their profits.

Some lenders, but by no means all, repriced their tracker deals and relaunched them at wider margins. So while the headline rate still looked attractive to many borrowers, the 1.5% base rate cut had not been fully passed on.

A month on, a large number of lenders have still not launched new tracker rates - and another base rate cut looks imminent.

Groundhog Day?

So what is going to happen this week? With the economy still set to enter a recessions, many experts feel it needs to fall further, to at least 2%. Some economists argue it should go even lower. But will the Bank cut this week, or wait until the New Year?

My prediction (for what it's worth) is that there will be a cut of 0.25% on Thursday, followed by another quarter percent cut in January. But what do I know? This week's rate decision might, of course, be much more significant.

If the Base Rate is cut by any amount, it could be a case of Groundhog Day for mortgage borrowers, and particularly if the rate cut is larger than expected.  Will lenders withdraw their tracker products completely and reprice all over again at higher margins? It's certainly possible, which means that getting into a tracker deal now might pay off, because deals could get less attractive. 

So, what are the best tracker deals on offer right now?

Today's trackers

HSBC repriced its lifetime tracker deal last week, which had been the lowest rate on the market at 3.99%. Now it is 4.64% (Base Rate plus 1.64%) and still pretty competitive. It comes with a fee of £799 and is available up to 60% loan to value (LTV), so you need at least a 40% deposit or equity.

If you are already on this mortgage or you manage to secure it in the next few days, a Base Rate cut on Thursday would see your payrate drop again making it a very attractive deal indeed.

There are lower tracker rates than the HSBC deal on the market, but they come with catches. For example the Cumberland Building Society offers a lifetime tracker at Base Rate plus 1.54% (currently 4.54%). This is also an offset mortgage, is available up to 80% LTV, and has a tiny fee of £599. But unfortunately it is only available to lucky borrowers living within The Cumberland's branch area, in and around Cumbria.

Cheltenham & Gloucester has the lowest tracker rate I could find, available to anyone with a 40% deposit or equity. The two-year rate of 4.39% is market-leading but  it comes with a whopping 2.5% fee (£5,000 on a £200,000 mortgage), meaning it will not suit many borrowers. C&G does have a two-year tracker with a low fee of £495, but the rate jumps to 4.99% (up to 60% LTV).

Newly launched

Last week Nationwide and Woolwich launched new ranges of tracker products, and both are fairly competitive, if not market leading. The lowest rate offered by both lenders is not surprisingly, in their 60% LTV tier, at Base Rate plus 1.99% (currently 4.99), with a fee of £995.

Woolwich also has a tracker option at 80% LTV. Unbelievably this is the highest LTV currently available for a tracker. In other words borrowers need a minimum of a 20% deposit to get a tracker at all.

The deal is a lifetime tracker with a £995 fee at Base Rate plus 2.99% (currently 5.99%) and borrowers with a minimum deposit or equity of 20% can get the deal. The mortgage is available with a drop-lock option for three years meaning that the borrower can switch to a Woolwich or Barclays fixed rate without incurring early repayment charges (which otherwise apply for three years).

Two other deals are available at 80% LTV. One is the Cumberland deal mentioned above, which combines a really low rate with a high LTV, but unfortunately only for locals. The other 80% tracker is from The Derbyshire. Like the Woolwich mortgage it is Base Rate plus 2.99% (currently 5.99%) and its fee is £999.

 And that is it at 80% LTV.

What should you do?

If you have a deposit of less than 20%, sadly, you cannot take out a tracker mortgage at all right now. Your alternatives are a fixed rate, which fixes your rate at a set level for a set period, or a discount variable rate, which tracks a lender's Standard Variable Rate at a set difference.

If you do have over 20% deposit (or equity), and you really want a tracker deal, think about making your application today. Rates could be well re-priced again depending on Thursday's Base Rate decision.

When it comes to market-leading mortgage deals this month, I'm afraid it's very much a case of: you snooze, you lose.

Compare mortgage deals at Fool.co.uk