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Mortgage figures from the Council of Mortgage Lenders

18 December2008

In yesterday's issue of its 'news & views' newsletter, the Council of Mortgage Lenders provides an informative summary of today's mortgage market.

Acknowledging that the margins on new tracker mortgages are significantly higher than they used to be, it admits that this 'is frustrating for consumers' but that it 'reflects the fact that the marginal cost of raising funds for lenders remains much higher than Bank rate'.

'The reality is that, with Bank rate at 2%, a tracker at, say, 0.5% over Bank rate is likely to be loss-making because average funding costs for the lender are unlikely to be as low as 2.5%.'

About a quarter of mortgagors have a tracker mortgage, nearly half have a fixed-rate mortgage - and only 10% or so of mortgage lenders' total income comes from customers on an SVR (Standard Variable Rate) mortgage.

As the CML points out, fixed-rate mortgages are unaffected by the Bank of England's base rate decisions, while tracker mortgages automatically follow base rate changes. The relatively small category of SVR mortgages is the only one in which mortgage lenders have any choice in terms of 'passing on' cuts to the base rate.

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Tags: mortgage, tracker mortgage, fixed rate mortgage, mortgage advice, mortgages, council of mortgage lenders

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