Mortgage Lenders Slow to Respond Positively
Some mortgage lenders have reacted to the Bank of England rate cut or the Government rescue package by raising tracker rates or by increasing their demands for deposits. It is hardly the response the Government would have hoped for.
The response of mortgage lenders to the Bank of England’s 0.5% cut and the Government’s rescue package last week has been underwhelming.
Some mortgage lenders withdrew their best deals at the end of the week, and actually made life harder for borrowers.
Tracker rates – said to depend on the Bank’s base rate – were increased by some lenders. Although trackers that are in place must follow the changing Bank rate (plus a percentage), new tracker mortgages have had their starting points raised. For example, new customers with Abbey now have to pay 0.5% more than last week, despite the cut in the base rate of the same amount.
Shortly after the Bank of England’s announcement last Wednesday Lloyds TSB removed all its homebuyer trackers with deposits of 10% or less; now the minimum deposit demanded is 25% of the purchase price. Woolwich also raised its rates and increased the minimum purchase deposit to 15%.
Such actions don’t appear to following PM Gordon Brown’s urgings for the banks to do more to help new buyers get on the housing ladder.
As taxpayers are gaining an increasing stake in nearly all banks, it is mystifying that they can’t borrow back the money they are lending to the banks!
Nationwide has made no move yet, and says it is watching the market.
Halifax has previously promised that its standard variable rate would only even by 2% higher than the Bank’s base rate. Now, however, it is writing to its borrowers to say that the differential will be raised to 3% from 31 October.
Mortgage lenders will claim that they are taking a more responsible attitude to lending, and, of course, following the lending excesses of the past ten years, this would be commendable. However, moving lending rates against the prevailing base rate seems to be taking things to extremes.
