Tracker rates fail to reflect base rate cuts

According to mform.co.uk, the online mortgage company, rates on some tracker mortgages have increased almost a quarter of a percentage point, despite the two recent cuts in the base rate.

Some tracker rates have risen by as much as 0.23% since the beginning of December, while the Bank of England’s base rate has fallen by 0.5%.

Tracker rates should fall and rise in line with the base rate, but many lenders are looking to their profit margins and have either not reduced their rates or have raised them.

For example, Lloyds TSB was charging some tracker mortgage customers 6.11% at the start of December.

The bank cut this in line with the quarter-point reduction in the base rate during the month but has since raised it again to 6.34%, or 1.09% above base rate.

In the case of Nationwide Building Society’s 90% loan-to-value tracker mortgage, the rate stood at 5.58% at the beginning of the year.

It was increased to 5.68% in mid-January and then cut back to 5.58% after the February reduction in the base rate.

Francis Ghiloni, marketing and business development director at mform.co.uk, says: “The Bank of England rate cuts are not feeding through to borrowers with trackers as lenders re-price.”

He argues that: “a 0.5% 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.”

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