Existing borrowers are sitting pretty following the recent rate cuts, but is it at the expense of new deals?
Most existing variable rate borrowers have seen their monthly mortgage payments drop over the last three months - some by a little, others by a lot. Those on trackers will be feeling particularly smug as they have seen three percentage points wiped off their rate.
Indeed,I've seen statistics saying tracker customers across the country will be up to £9bn better off by this time next year.
That money combined with the cost of reducing SVRs as a result of pressure from Brown and Darling will need to be recouped by lenders somewhere - and it could be new borrowers bearing the brunt.
New tracker mortgage deals began to be removed from the market following last week's rate announcement - a move that was not unexpected, as I wrote last week.
Alliance & Leicester, Abbey and Nationwide all pulled their tracker rates. And now they are starting to relaunch their tracker rates (bar Nationwide at time of writing), and reprice their fixed rates for new borrowers. The rates look lower, but not one percentage point lower. In other words, margins have predictably been widened.
So what's new?
Well, trackers are looking pretty appealing, even if they haven't tracked Base Rate down by the full 1%, with plenty of low loan-to-value (LTV) deals under 4% and even mid-LTV deals under 4.5%.
Lloyds TSB and C&G were the first out of the starting block with their new tracker ranges - and they offer a comprehensive selection of different rate and fee combinations, up to 0.7% lower than pre-rate cut deals.
For those with a 60% loan to value (LTV) ratio -- in other words borrowers with a 40% deposit or equity -- the headline rate is a 4.09% two- year tracker with a hefty £1,995 fee.
Choose a lower fee of £995 and the two-year rate only jumps to 4.19%. Or the lenders offer a lifetime tracker at 4.15% with a £995 fee.
Of course, most of us (and certainly the majority of first-time buyers) don't have a 40% deposit, so Lloyds and C&G also have a tracker range at 75% LTV. Unfortunately they still don't offer trackers above this level, something that needs to change across the market to allow first-time buyers to access variable mortgage rates.
For borrowers with a 25% deposit, the headline rate is a tempting 3.69% but it comes with a whopping 2.5% fee - that's £5,000 on a £200,000 mortgage.
Alliance & Leicester has launched one tracker deal at 60% LTV. The attractive 3.99% two-year Base Rate tracker comes with a 1% fee.
Abbey has also launched a new two-year tracker range and it says it has reduced rates by up to 0.9%. Unfortunately the lender's trackers still only go as high as 75%, with the best rates, of course, reserved for those with a 40% deposit.
Best buy trackers?
But the best new Base Rate tracker deals are from First Direct, which launched two market-leading deals last Friday.
Not only do they come with low rates and low fees, they are also available up to 80% LTV, the maximum available for trackers (at time of writing). Full marks to First Direct for introducing these two deals, and for being consistently competitive all year long.
The first is an Offset Base Rate Tracker Mortgage which tracks the Bank of England Base Rate for the life of the loan. It is priced at 1.49% above Base Rate and is currently 3.49%. The mortgage has a reasonable £599 arrangement fee and maximum LTV of 80%.
The second deal is the Life Tracker Mortgage, a capital repayment mortgage which tracks Base Rate for the life of the loan. It is priced at 1.69% above Base and is currently 3.69%. This mortgage has a tiny £399 arrangement fee and maximum LTV of 80%. For the record, First Direct's SVR is also currently the lowest on the market at 3.69%.
HSBC has a very competitive tracker rate (that was in place before the base rate cut and not withdrawn) at 3.64% with a £799 fee up to 60% LTV.
What about fixed rates?
A couple of lenders have launched new fixed-rate mortgages in the last week but more are sure to follow.
As yet Abbey and A&L have offered no major surprises, although Abbey's three year fix at 5.84% is available to 85%, so could help more potential buyers in the market. The deal comes with a £995 fee -- which has unfortunately now become pretty standard for fixed rates.
Abbey says its two-year fixed rates are market-leading. It has a 4.29% deal with a £995 fee up to 60% LTV. And for those who need to borrow up to 75% LTV, the rate jumps to 4.49% with the same fee.
Finally, A&L has a wider range of two-year fixes which have been cut by up to 0.5%, including a fee-free deal at 4.99% up to 75% loan to value. Its other fixes include:
- 3.99% with a 1% fee, customers can borrow up to 60% of the property value
- 4.49% with a 1% fee, customers can borrow up to 75% of the property value
- 4.69% with a £599 fee, customers can borrow up to 75% of the property value
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