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November 4, 2008    

Abbey raises tracker margins by up to 0.5%

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by Gill Montia
Abbey raises tracker margins by up to 0.5%

Abbey has announced that it is increasing rates on its two and three-year tracker mortgages for new borrowers, by up to 0.5%.

The news comes as analysts are predicting that the Bank of England’s Monetary Policy Committee will cut the base rate by least 0.5%, and possibly 1%, later this week.

Tracker rates provide a fixed margin above the base rate and from 5th November, Abbey’s two-year tracker deal will be available at 1.79% above base rate; the three-year deal at 1.69% above base rate.

Applicants will need a minimum 25% deposit to qualify because the lender is also withdrawing tracker products for customers with less equity in their homes.

The bank has been growing its share of the UK mortgage market since the onset of the credit crisis and is reckoned to be the country’s third-largest lender.

Abbey says the rise in tracker margins is in line with market trends but critics see the increase as pre-empting this week’s base rate cut and protecting the bank’s profit margins.

In related news, a senior executive at HSBC warned yesterday that lenders may not pass on the full benefit of this week’s expected cut in the base rate.

The bank’s chief operating officer, David Hodgkinson, explained that lenders will look at a particular situation and risk before lowering rates.

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