Tuesday, Jan 22, 2008
Mortgage rates now detached from BoE rates
Independent: Nationwide becomes the latest lender to raise mortgage rates
The cost of borrowing money is continuing to rise this month, despite a cut in the Bank of England base rate at the start of December and a sharp reduction in Libor, the rate at which banks lend to each other, over the past few weeks. Yesterday, Nationwide, the UK's largest building society and fourth-largest mortgage provider, became the latest lender to announce price rises across its tracker mortgage range. It will increase rates for new borrowers by up to 0.15 percentage points as of tomorrow.
Posted by uncle chris @ 09:49 PM (753 views) Add Comment
9 Comments
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1. little professor said...
Yep. The markets have already priced in a 0.25% cut by the BoE in Feb, so even that cut won't do much to ease things for your average overstretched homedebtor.
2. dohousescrashinthewoods said...
And we're surprised? The banks darkly raised a colective one-fingered salute to Tweedle Darling and Tweedle Brown when they tutted and exclaimed that cuts should be passed on. Banks will do what they can to make more money and I'm quite sure they barely care who ends up homeless. Individuals may care, but the organism makes it unfeasible for individuals to express their humanity.
3. su said...
I gather the increase is only for new borrowers and in theory shouldn't affect those who already have a tracker mortgage. But it is likely to discourage those currently on a good rate tracker from re-mortgaging or moving house.
4. tyrellcorporation said...
Lloyds online saver has 'secretly' cut it's IR twice (by 0.5%) since the BoE cut the base rate. They also pulled the neat trick of sending people an email two weeks after the rate had been cut. Funny as I thought email was pretty instantaneous. I've moved all my cash out of the account apart from a tenner so they still have some degree of admin on it.
It's worth checking all the rates on all your accounts folks as these bastards have no scruples.
5. ben said...
@su
It wont discourage people from moving house as most mortages are portable, so they can take the mortage (and the rate) with them to the new house.
"gather the increase is only for new borrowers and in theory shouldn't affect those who already have a tracker mortgage".
Exactly, by definition a tracker tracks the BoE base rate exactly, so if the BoE reduce rates by 0.25% then a tracker will also reduce by exactly 0.25% on exactly the same day. Most mortgages arn't trackers though, most are Discount mortgages which don't track the BoE rates exactly... e.g. if the BoE put rates down 0.25% then a discount may only go down 0.15%, if at all and maybe a few weeks later.
So, finally getting to the point, a bank would not be allowed to put up the rate on an existing tracker mortgage as it has to track the BoE rate exactly. But they can do what they like (Within reason) to Discount rates.
6. su said...
Good for you, Tyrell! I hope more people follow your example.
Thanks for the warning as well. :-)
7. su said...
Ben.
"It won't discourage people from moving house as most mortages are portable, so they can take the mortage (and the rate) with them to the new house."
I didn't know that and neither do at least some of my friends with tracker mortgages who were discussing this very issue. Thanks for the info! :-)
8. little professor said...
LOL Tyrell, I thought I was the only one who did that. I have withdrawn all but £10 from my two Barclays accounts - they still sends me monthly statements which over the years have cost them much more than the value of my deposits.
9. su said...
I hope British banks don't go the way of those in Germany. If you wanted to avoid bank charges you had to have a minimum amount in your account and the bank had to inform you every 3 weeks of your balance. You had the choice of getting a mini-statement from the machine or allow the bank to send you a statement - which they charged you for!