Abbey is the first to re-enter the tracker market

Published 12th Nov 2008

Abbey today became the first high street lender to relaunch mortgage deals pegged to the Bank of England base rate.

Last week almost every bank and building society pulled their trackers deals after the Monetary Policy Committee cut the cost of borrowing to 3 per cent.

But homeowners hoping to benefit from the 1.5 percentage reduction in full will be disappointed to learn that the UK's second biggest lender has increased rates on new tracker deals by up to 0.7 percentage points.

From tomorrow Abbey will be offering a two-year tracker for borrowers with a 25 per cent deposit with a rate of 1.99 percentage points above the base rate, currently 3 per cent. Loans are capped at up to £250,000. The maximum loan-to-value ratio is 75 per cent.

Last Thursday the lender was offering a similar two-year deal at 1.29 percentage points above base.

Aaron Strutt, of Chase De Vere Mortgage Management, a broker, said: "The margin on these deals has crept up but that was always bound to happen, particularly considering the base rate is expected to fall further."

Other lenders, including Halifax, the UK's largest lender and Lloyds TSB, are expected to announce new tracker deals later this week. However experts warn that similar increases in rates are expected as lenders try to protect profit margins in the wake of the financial crisis and a base rate which is at its lowest level in more than 50 years. Some commentators have predicted that the base rate will fall below 2 per cent by the middle of next year.

Abbey has also cut up to 1 percentage point from new fixed-rate deals available tomorrow. Borrowers with a 40 per cent deposit will be able to get a two-year fixed rate from 4.49 per cent with a fee of £995. Cheltenham & Gloucester, owned by Lloyds TSB, has also unveiled new fixes from today.

Fixed-rate deals have been falling for a number of weeks as the cost of funding fixed-rate lending from wholesale markets has dropped considerably.

Meanwhile, Alliance & Leicester, which along with Abbey is also owned Santander, the Spanish banking giant, is yet to announce whether it will cut its standard variable rate in line with the base rate reduction last week.

HSBC and Woolwich, the mortgage brand of Barclays, are also still reviewing their standard variable rates and say a decision will be made at a later date.

Source: ' times '

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