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Tracker mortgages 'more expensive despite base rate cut'

20 October2008

The Bank of England's base rate cuts have been negated by rapid rises in the price of tracker mortgages over the past year, research shows.

A report from mform.co.uk showed that the average lifetime tracker rate charged by leading lenders for mortgages is just over 1.6% above the Bank of England base rate. This means that the average new tracker mortgage carries an interest rate of over 6.1%.

That 1.6% margin is over five times the 0.3% margin on new tracker mortgages in October 2007, when the base rate was 5.75, meaning tracker mortgages carried interest rates of around 6.05% - about 0.05% cheaper than the current average for new tracker mortgages.

A spokesperson for Think Money said: "Because of the way tracker mortgages have changed, homebuyers looking at a tracker mortgage today may end up paying about the same as they would have done if they'd taken out a tracker mortgage this time last year, despite the cumulative base rate cut of 1.25%.

"Even so, mortgages are still relatively cheap compared with previous decades, and although they are more difficult to obtain, there is still a wide range of mortgages on the market - it just might take a little more planning to find the right mortgage deal."

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Think Money offer mortgages for people in various financial situations. If you are considering buying a home, contact one of our expert mortgage advisers today.

Tags: tracker mortgage, tracker, trackers, tracker mortgages

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