Tracker products WITHDRAWN by mortgage lenders following rate cuts last week
One of the UK’s biggest lenders, Nationwide, temporarily withdrew all mortgage tracker products on Thursday last week. However, these will be re-introduced as of March 25 for home movers and first time buyers, with rates starting from Bank Rate plus 1.39 percent, while new remortgage tracker products will start from Bank Rate plus 1.19 percent.
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Henry Jordan, Nationwide’s Director of Mortgages said this evening: “With two cuts in interest rates in just over a week, we took the prudent decision to carefully consider the impact on our mortgage range.
“However, as the UK’s second largest mortgage lender, it is important the Society continues to offer members a range of options, while also ensuring we continue to maintain our high levels of service.
“We are re-introducing two-year trackers to our mortgage range to enable us to offer products with flexibility and no early repayment charges.”
Another major mortgage player HSBC announced today that it has temporarily removed access to all two-year tracker rate products, together with Barclays, who also withdrew a selection of mortgages across their residential and buy to let products as of earlier today.
In addition, Barclays have suspended all portfolio landlord products and as a result, are no longer accepting applications from professional investors, at least temporarily.
Similarly, high street lender Santander have withdrawn one of their key tracker products for large loans and have increased rates on some of their other tracker products.
Outlining why lenders are taking these steps, James Tucker, CEO of mortgage sourcing platform Twenty7Tec explains: “The profit that lenders make from mortgages was already at historic lows prior to coronavirus.
“Lower interest rates have not translated into cheaper costs for lenders.
“In fact, their costs may well have risen in more risky areas such as buy to let, as the cost to the lender to borrow the money has also gone up.”
Mr Tucker adds: “Some specialist lenders, for example Together, have withdrawn from the mortgage market entirely and are watching how events unfold before determining if and when they can re-enter, and if so, what their rates will need to be in order to be profitable.”
Mark Harris, chief executive of mortgage broker SPF Private Clients also comments: “We are caught in a peculiar place.
“Base rate is at an all-time low, while swap rates are historically still in a low place as well.
“However, we have seen tracker rates pulled with replacements introduced carrying an increased premium over the central bank rate.”
“We have not seen the fall in pricing on new fixed-rate mortgages that we would like to have seen as lenders are having to balance pricing and service, particularly as current conditions make it trickier for staff to operate as normal.”
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Andrew Montlake, MD of Coreco mortgage brokers observes that other sorts of products may be withdrawn in the not too distant future, and suggests: “We will see some more changes in the days ahead; less availability of 90 percent and 95 percent Loan to Value mortgages, rate increases and specialist lenders pausing all lending as this crises develops.
“The message to all borrowers is to take professional advice as soon as possible to understand all of the available options.”
Mr Karasavvas, Managing Director of Prolific Mortgage Finance also indicates that choice for new borrowers may be reduced for a while, and suggests: “Following the second cut of the Base Rate and the withdrawal of tracker products from Nationwide’s product range, I would see the availability of no penalty trackers disappearing from most lenders portfolio over the coming weeks if not days.
“Those that will remain, will no doubt do so with a mark-up on the margins, as lenders simply cannot continue to lend on Pre Covid-19 margins where the Base was set much higher.”
But where does all of this leave those who want to apply for a remortgage, or even a mortgage to fund the purchase of their next property if they are moving home in the coming weeks and months?
Mr Karasavvas concludes: “Whilst I do expect trackers to become less prevalent, I would also expect a small reduction to start on fixed borrowing as we are seeing from HSBC and Nationwide already.
“Tracker products that will remain will either be set with a higher margin above the base, or with redemption penalties within the incentive period. Low tracker margins, with full flexibility will in my view be something we will be missing from the market for some time.”
As is always the case with mortgages, but even more so at the moment, it’s important to fully understand the terms and conditions of any product you’re considering.
“The small print can be just that and may sometimes be confusing for even the most seasoned borrower.
If you’re in any doubt whatsoever, now is the time when taking professional mortgage advice can, quite literally, pay dividends.
Follow Louisa on Twitter: @louisafletcher
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