FINWIRE®

Credit crunch fails tracker rates

February 26th, 2008

Tracker borrowers are not getting the benefit of interest rate reductions as the lenders are re-pricing their mortgages.

A recent research from an online mortgage company reveals that rates on some tracker mortgages have increased by almost quarter of a percentage point despite the despite the base rate being reduced by double that amount.

Since December last, the Bank of England has cut the official lending rate twice by 0.25% each time, the current rate being 5.25%.

However, some tracker rates have increased by as much as 0.23% since December despite the official rate being brought down by 0.50%. Tracker rates follow the base rate of interest as revised by the central bank from time to time.

Many lenders have either not reduced their rates in line with base rate cuts or have re-priced their products citing credit crunch and higher borrowing costs in the market.

Francis Ghiloni, marketing and business development director at mform.co.uk, said: “The Bank of England rate cuts are not feeding through to borrowers with trackers as lenders re-price.A 0.5 percent rate cut this month was the minimum that was needed to help both borrowers and lenders and our analysis shows that another cut is needed.

”The numbers of mortgages have also come down significantly owing to the credit crunch in the UK financial markets and consequent high borrowing costs. Secured loans and mortgages meant for purchasing homes have also witnessed a rise in their interest rates.

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