Increase in Tracker Mortgages in Wake of Credit Crunch
Following the collapse of Bradford and Bingley, other lenders have now removed their deals from the market - over 11% of mortgages were pulled.
The recent collapse of Bradford and Bingley created fears of an increased crisis in funding, prompting several other leaders to withdraw over 11% of their more competitive products on offer.
The credit crunch, which began in full force in August this year, has led to lenders removing all ‘100% plus’ deals, and it is now particularly difficult to find 100% loans.
The buy-to-let market has been hardest hit as a result of these turbulent times, with over 85% of all packages removed from the market over the last 12 months. The residential market is in slightly better shape, with 60% of products withdrawn.
Lenders are slowly removing the more competitive products from the market, and are showing a reluctance to lend until they have a clearer view of where the market is heading.
As a result of this uncertainty there has been a significant shift towards tracker mortgages, which won’t tie the borrower in and therefore allows them to wait and see which way the market develops. Applications for tracker mortgages have almost doubled from 2007, to nearly 60% in 2008.
Borrowers are choosing tracker products while they sit out the economic confusion. They are attractive because they are linked to the Bank of England bank rate, which many believe will be forced to cut its rates to save further economic crisis.
As the market continues to fluctuate tracker mortgages offer a variety of benefits, including relatively low costs and low redemption fees if the borrower does decide to switch products early.
There are currently 32 tracker products available on the market, offered from a variety of lenders, including many high-street names. The most competitive lifetime trackers can currently be found at HSBC and the Woolwich.
