CML issues warning on trackers

04/03/2009

Attractive tracker mortgages are disappearing from the market, the Council of Mortgage Lenders (CML) claimed today.

According to the industry body, the recent interest rate cuts from the Bank of England have led to mortgage firms looking to withdraw or reprice the deals.

This is because tracker mortgages are designed to mirror the Bank's lending rate.

Since the middle of last year, this rate has been slashed from five per cent to an all-time low of one per cent, making it much cheaper for those on trackers to repay their loans.

What's more, the Bank is expected to cut rates further tomorrow - possibly to 0.5 or just 0.1 per cent.

Bernard Clarke, spokesperson at the CML, said: "[Customers] are unlikely to get the same deal and they need to plan ahead and think about how their financial commitments may change when their tracker comes to an end.

"We expect that most [people] will be able to make the adjustment without that much difficulty with interest rates set to remain low, they may adjust to a new tracker product that may be a little more expensive than they are used to paying currently."

Kevin Still at EuroDebt added: "It is a bizarre situation for many struggling homeowners to contemplate that their mortgage payments may go up significantly when interest rates are still coming down, but that is the reality of the current market for many that switched to promotional tracker and fixed rate deals just before the start of the Credit Crunch in May or June of 2007.

"As a Debt Management Company, we are often asked by creditors and their debt collectors whether all the interest rate reductions should be passed on to the unsecured lenders that our clients owe money to. The reality is that over the annual review period we look at for each client the majority have seen a reduction in disposable income. EuroDebt anticipate that loss of income and major rises in household expenditure will more than offset the majority of mortgage payment reductions that some clients have benefited from. Off course many have not seen their mortgage payments reduce at all during the recession."

A report earlier this month from IVA.com warned that tracker customers could only expect to get a more expensive deal when their current mortgage expires.

Figures from the firm showed that monthly payments on a typical tracker reflecting the base rate were currently just £200 - but were £625 in February 2008.

Tags; Housing Debt and Bills, Young Family Finances, Retirement Money Problems,

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