Halifax made headlines this week by raising rates on tracker mortgages for home mover and remortgage customers, less than two weeks after the Bank of England rate was cut to a historic 0.25%.
Customers taking out a tracker mortgage will now experience rate rises of 0.25% with immediate effect across the lender’s range of tracker products, a move that many have criticised as ‘unwarranted’.
The change follows Halifax’s recent decision to pass the rate cut onto its variable rate customers, with those on either a homeowner or standard variable rate seeing a reduction of 0.25%, in line with base rate movement. However, many in the market have deemed this as ‘cynical’, failing to make lending as attractive to potential borrowers as possible in the current market.
The majority of lenders have reduced their standard variable mortgage rates (SVRs) in line with the base rate, although some have also made small increases alongside this. For example, Nationwide recently increased selected variable tracker rates by 0.1%, with a number of lenders also appearing to pre-empt the base rate reduction in the run up to the change, with the likes of Natwest, TSB, Santander and RBS, all increasing rates on variable tracker deals beforehand.
A supposed 0.2% increase in tracker margins has been witnessed since the referendum result, as speculation on whether the base rate would be cut continued. Some tracker rates are now thought to be approximately 0.3-0.5% more expensive than before the EU Referendum.
Overall, however, the average two-year tracker mortgage deal has now fallen below 2% since the base rate dropped, marking the first time this has happened on record.
The drop in the base rate has certainly spurred activity in the tracker mortgage market, yet the market remains flooded with low fixed rate deals. The average two-year fixed mortgage, now at 2.47%, fell from 2.54% six months ago and from 2.68% a year ago.