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Specialist UK Mortgages...
Now risk reduced, will mortgage rates follow?
Mortgage lenders have so far failed to pass on the full impacts of base rate cuts into new mortgage deals, instead opting to pass on part of the cut and increase margins.
The average two year tracker mortgage is 2.60% above base rate and even the best deal is 1.99% above base. By comparison, at the beginning of October before the 1.50% cut, the average tracker was 1.29% above base and the best deal just 0.53% above base.
Fixed rate mortgages fare no better, with the difference between the average two year fixed mortgage and two year swap rate increasing from 1.02% in October to 2.84% today.
Tracker Mortgages
|
1 October 2008 |
19 January 2009 |
Average 2 year tracker rate |
6.29% |
4.10% |
Best 2 year tracker rate |
5.53% |
3.49% |
Base Rate |
5.00% |
1.50% |
Difference between base rate and average tracker rate |
1.29% |
2.60% |
Difference between base rate and best tracker rate |
0.53% |
1.99% |
Source: Moneyfacts.co.uk 19.1.09 |
||
Fixed Rate Mortgages
|
1 October 2008 |
19 January 2009 |
Average 2 year fixed rate |
6.28% |
5.18% |
2 year swap rate |
5.26% |
2.34% |
Difference between swap rate and average fixed rate |
1.02% |
2.84% |
Source: Moneyfacts.co.uk 19.1.09 |
||
Michelle Slade, analyst at Moneyfacts.co.uk, comments:
“In recent months, lenders have been quick to point out that the increased margins are as a result of the increased risk that they faced.
“Now that the Government has stepped in to reduce that risk, borrowers will be hoping that not only will the banks start to lend again, but that the reduced risk is passed on with lower rates being offered.
“Remortgagers looking for a new deal are likely to see their repayments increase significantly when their old deal ends, so many will opt to go on to the cheaper standard variable rate (SVR).
“The average SVR today stands at 5.06%, but many of the larger lenders have rates as low as 3.50%. With SVRs this low and no penalty payable when you decide to move to a new deal, many remortgagers are likely just to stay put.
“If the Government is hoping to help first time buyers and home movers then the lenders not only need to be willing to lend, but need pricing that entices borrowers onto new deals.”
Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.
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