A&L pulls two-year trackers

22 October 2008
Alliance & Leicester is to pull all its two-year tracker mortgages following a surge of demand from borrowers hoping to cash in from base rate cuts.

The lender, which is currently in the process of being acquired by Santander, the Spanish owner of Abbey, says predictions of future base rate cuts have prompted a flurry of application for tracker deals.

As a result, it is withdrawing all of its two-year products from the end of today (Wednesday 22 October).

Richard Taylor, head of mortgage products at Alliance & Leicester, says: "Over the past few days we have seen a high demand for all of our two-year tracker products.

“We have, therefore, taken the decision to remove the tracker products from the range in the short term in order to manage the volume of business we are receiving at present.”

The move comes after several lenders have hiked their tracker rates.

David Hollingworth, a mortgage specialist at London & Country, says the high cost of funding for variable rate loans on the money markets (known as Libor) is putting pressure on tracker margins – forcing lenders to either put up rates or withdraw from the market.

Halifax and Nationwide have both put up their tracker rates in the past few weeks, while Abbey and Barclays (through its Woolwich brand) have unveiled two sets of price hikes.

Yorkshire Building Society, meanwhile, pulled its tracker mortgage range on the 7 October and has yet to reissue it.

Hollingworth says: “The mortgage market is constantly moving at the moment, and it is no surprise tracker rates are going up because Libor remains high.

“The good news is it is starting to fall at a quicker rate than we’ve seen before, but it will be a while before tracker mortgage rates come down.”

He adds: “The danger for borrowers looking to remortgage is playing a waiting game for rates to come down – but if they are on their lender’s standard variable rate they could be paying a high price for hanging on.”

Fixed-rate mortgages also show positive signs of coming down in cost, as swap rates (the funding from the money markets used to price these sorts of deals) have got a little cheaper.

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