Tracker loans reappear

Following the large-scale withdrawal of tracker mortgages last week, as the bank of England’s base rate fell to 3%, a number of lenders have now reintroduced tracker loans, some having increased their margins.

Abbey is offering a two-year tracker deal for those with a 25% deposit, at 1.99% above base rate (4.99%) compared with an earlier deal at 1.79% above the Bank rate.

Alliance & Leicester has also revised its tracker mortgage range, with the margin again 1.99% above the base rate, for certain loan-to-value ratios.

Lloyds TSB and its Cheltenham & Gloucester (C&G) subsidiary have launched a range of “All Weather” tracker products that allow customers to switch to a Lloyds TSB or C&G fixed-rate mortgage without incurring an early repayment charges.

For those with a 40% deposit, the two-year “All Weather” tracker comes with interest at 4.79% (base rate plus 1.79%) and a £1,995 fee.

For a lower fee of £995, the loan is available at 4.89% (base rate plus 1.89%). This same fee is charged on the lender’s full term “All Weather” tracker with interest at 4.85% (base rate plus 1.85%).

Borrowers hopeful of further cuts in the base rate should not opt for a tracker mortgage without first reading the small print.

Some deals include a “collar” or “floor” which allows the lender to cut off from the base rate.

If the Bank rate falls to a set threshold (currently averaging 2.75% to 3%) future cuts will not be passed on to customers.

Trackers have been growing in popularity in recent months and mortgage experts are still predicting that they will offer better value than fixed-rate deals as the UK enters a recession and interest rate cuts continue.

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