Several lenders, including the mortgage arm of Lloyds TSB, Nationwide and Alliance & Leicester, have withdrawn their tracker mortgages as interest rates continue to fall.
On Thursday 6 November, the Bank of England voted to cut interest rates by 150 basis points. Although tracker mortgage borrowers will benefit from 1.5% reduction in their monthly repayments, people hoping to take advantage of falling rates by opting for a tracker deal will not be so lucky.
Cheltenham & Gloucester, the mortgage arm of Lloyds TSB, and Alliance & Leicester both pulled their tracker ranges ahead of the interest rates decision. Following the base rate cut, Nationwide has pulled its range, along with Norwich & Peterborough, Woolwich and Saffron Building Society.
And BM Solutions (part of the HBOS group) has pulled tracker deals for self-certification and sub-prime borrowers.
Matthew Carter, director of mortgages at Nationwide, says: “In light of recent announcements by a number of other competitors that they have withdrawn their full tracker range, we are withdrawing our tracker product range. This is an interim measure in order to maintain service standards for both new and existing borrowers and will be reviewed going forward. It is a prudent measure in the current climate.”
Meanwhile, Abbey has withdrawn all tracker products for people looking to borrow more than 85% of the value of their home, and also increased rates on its two and three-year tracker mortgages for new borrowers by up to 0.50%.
Alan Harper, head of mortgages at financial data provider Moneyfacts, says: “C&G has taken the decision for one of the following reasons - either the cost of money it can borrow is too high, there may not be enough of it floating around, or it is just not wanting to be too competitive.”
However, he believes that the move is not wholly unexpected given recent moves by other lenders. HSBC recently warned it might not pass on any cuts in the base rate to its SVRs – a decision that left Gordon Brown red-faced after he urged banks to pass on the benefits of lower rates to customers.
Harper adds that no lender wants to be too aggressive or risky in the current market for fear of the business they’d attract.
Amanda Glover, a spokeswoman for Cheltenham & Gloucester, says: “The reality is that tracker products are either being priced upwards or being withdrawn. We will pass on any cut to the base rate for existing customers on tracker or standard variable rate products, and will relaunch new tracker products in the first half of next week.”
Francis Ghiloni, marketing and business development director at online mortgage company mform, says: “We can see no rationale for trackers to be withdrawn or get more expensive. While it is hard not to accuse lenders of profiteering, charging a premium for new business perhaps reflects the current risk lenders have on their books.
"You could argue they are covering themselves for the mortgages granted within the last 18 months.”