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Borrowing for property in UK being held back by lenders

Average tracker mortgage rates are at the same level as this time last year, despite a 1.25% cut in the base rate in the interim, according to research by price comparison website Moneyfacts.

It discovered that the average rate on a tracker mortgage is 6.27% today, compared to 6.23% in October 2007. While the 0.5% base rate cut at the beginning of October prompted many lenders to reduce their tracker rates, the reductions were offset by rate increases that have taken place over the last 12 months.

Moneyfacts analyst, Michelle Slade, said that the Bank of England base rate was once a major element in deciding mortgage rates but recent trends indicate that lenders are factoring in a much bigger margin for risk in pricing their loans and that this is keeping rates high.

'To illustrate the point, the base rate was last at its current level of 4.5% in August 2005, at which point borrowers could have obtained a rate of 4.25% on a two-year tracker, whereas today the best rate on offer is 5.99%,' she explained.

The base rate will be reviewed again next week and a further cut is expected but Ms Slade warned that lenders may in the future cap tracker rates setting a level below which they will not pass on base rate cuts.

Meanwhile research from online mortgage broker, mform.co.uk, has named HSBC as the most consistently competitive mortgage lender during the third quarter of 2008. The research is based on the number of products appearing in best buy tables and HSBC has topped the list, with Yorkshire Building Society coming second.

Nationwide, Newcastle Building Society and Halifax are also listed in the top five, although Halifax has slipped back a place from the tables covering the three months to the end of June.

Marketing and business development director at mform, Francis Ghiloni, concludes that HSBC's financial strength and relative immunity from the financial crisis has enabled it to stay ahead of its rivals.

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