Mortgages Uncovered

Many mortgage brokers are now saying that they expect the majority of banks to pass on the interest rate cuts in time, there is intense pressure coming from the government and consumers to make mortgages more affordable.

The NatWest RBS is encouraged by the current interest rate at which Libor the interbank lending rate had just fallen after the recent dramatic BofE cut.

Banks have already stated that unless the cost of funding the mortgage products reduces, they would still suffer difficulty in passing the BofE interest rate cuts to customers.

Lloyds TSB, along with Cheltenham & Gloucester was the first bank to reduce fixed rate mortgages base rate reduction. Those people who have high levels of equity in their properties or large savings for deposits can now borrow money at 4.89% for 2 years with a fee of £1,995. The bank was also the first to cut SVR rates last Thursday.

C&G marketing director, Stephen Noakes, stated that the falling swap rates that determine fixed rate mortgages, had meant that banks could re-price their fixed term mortgage products.

To date the banks have not given an indication of when they do plan to re-price any of their tracker products. After the recent interest rate cuts, most new tracker products were temporarily withdrawn from the banking market, with new deals expected to be announced next week.

Brokers now expect building societies and banks will increase margins on the new trackers which means that borrowers may make no gain from the whole interest rate fall.

On the other hand, if Libor continues to fall the same brokers are now saying that banks would soon offer much more competitive mortgage rates.