Lenders begin to offer tracker deals to new borrowers

Posted under General by Michael

As a result of cut back in interest rates from 4.5% to 3% by the Bank of England last week, mortgage lenders have relaunched tracker deals for the first-time borrowers.

Alliance & Leicester, Abbey and Lloyds TSB, have started offering new tracker deals with bigger margins between bank rates and charged rates.

Some of the deals are specifying higher deposits. Alliance & Leicester’s deals are offered at 40% deposit with 4.89% interest rate. In addition the borrower is required to pay 1% of loan value as arrangement fee.

Abbey’s tracker deal has two-year tenure with 25% deposit at 4.99% interest rate, which is 1.99% above bank rate.

Barclay’s mortgage brand, Woolwich, is offering one-year fixed-rate deal, charging 3.99% interest with 40% deposit. At the end of one year, the deal would revert to life-time 1.99% rate over current base of 4.99%. This ‘fixed and track’ deal has lock- in period of three years and carries early redemption charge of 1% of mortgage value.

Some lenders have put a collar or floor on tracker deals for existing and new borrowers which prohibits borrowers from receiving cuts if bank rates fell below fixed levels. HBOS has set floor at 3%, Nationwide at 2.75% and Abbey on 3% on selected existing deals.