Mortgages Uncovered

The UK’s leading mortgage lenders are still raising their interest rates for any new customers and therefore continuing to keep the interest rate cuts under their own roofs.

Office for National Statistics has stated that inflation which is measured by consumer prices index had now fallen to 4.5% during October which was down 5.2% on September. The inflation drop has been higher than economists had originally anticipated which is largely down to a slowdown in the price of food and dropping fuel prices.

Homeowners with current tracker mortgages will enjoy large cuts in monthly payments with the recent interest rate cuts; however, consumers who are looking for new tracker mortgage deals are set to pay bigger margins which are above the BofE rate.

Libor – which is the lending and borrowing rate between banks for funding mortgages recently fell to 5.75% at the end of September to nearly 4% this week.
Even in spite of all these rate cuts lenders are still increasing the interest rate margins on their new mortgages.

“The margins are very wide – much wider than they were a month ago,” said David Hollingworth, of London & Country Mortgages, the independent broker. “But for many consumers, a bigger problem will be that most of the products available at the moment are only for those with a low loan to value [LTV]. A rising number of borrowers may be forced to revert to their bank’s standard variable rate (SVR). This may not be as unappealing as it once was, as many banks have slashed their SVRs by 1.5 percentage points since the start of the month, after the Chancellor put pressure on them to pass on the full Bank rate cut.”
Sue Anderson, of the Council of Mortgage Lenders, defended the banks’ decision to increase the margin on their trackers. “It reflects the mix of business levels that lenders now have,” she said. “A lot of lenders fully cut their SVRs by 1.5 percentage points, even though their own funding cost would not have been cut by that amount.”