Product category:
Mortgages / Housing
News Release from: Defaqto | Subject: Mortgages
Edited by the Insidemoneytalk Editorial
Team on 04 April 2008
Borrowers suffer triple whammy with
tracker mortgages, says Defaqto
In the days before the credit crunch, people took out mortgages that tracked the Bank Base Rate because they thought the rate would drop in the future.
The loading above BBR was generally stable in the region of 0.5% to 0.75%, depending on the length of the tracker term In today's increasingly difficult conditions, all this has changed
This article was originally published on Insidemoneytalk on 15 Mar 2007 at 8.00am (UK)
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Not only has the number of available BBR tracker mortgages dropped by almost a quarter since July 2007, the higher loadings on the BBR have, on average, has more than negated the half percent decrease in BBR since then.
For two year trackers, the period with the most plans on offer, the average loading above BBR increased from 0.49% to 1.17% over the eight months since July 2007, an increase of 139%, while the BBR rate fell from 5.75% to 5.25% over the same period.
It's a similar picture for three year trackers with an average loading increase from 0.52% to 1.14%, an increase of nearly 120%.
For the other main mortgage term products, there have been increases, even if they have not been quite as swingeing.
For the consumer the pain doesn't stop there.
Not only has the number of mortgages on offer decreased while loading percentages have increased, but application fees have seen huge uplifts since July.
Fees for a typical 2 year mortgage have gone up from £688 in July 2007 to £1,005 currently, a 46% increase.
This gets worse at the tracker term increases, rising to a massive 139% for term trackers.
David Black, Principal Consultant - Banking at Defaqto said: "With banks and building societies trying to repair their balance sheets in an atmosphere of financial mayhem, it is hardly surprising it is the poor consumer who is caught in the middle and is having to pay more for less choice.
It is almost as though we are going back to the days when lenders felt they are doing you a favour by offering you a mortgage.".
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