Lenders pull trailing mortgages as demand soars due to higher fixed rates
Lenders pull a number of follow-up mortgages market as demand for this type of home loan skyrockets.
Natwest has retired its entire line of follow-up products, retiring ten two-year follow-up products for new and existing customers, starting Friday.
He said they would be back on the market shortly after being repriced in light of the Bank of England’s rate hike, but there was speculation they were fired after receiving an influx demands as the offers become more attractive, although Natwest has denied this.
Mark Harris, managing director of mortgage broker SPF Private Clients, said: “The Natwest trackers, starting at 0.69% above the base rate, were very competitive and would therefore have been very popular among borrowers.
“Given the increase in demand, he has struggled with service levels, so removing product is a way to slow volumes while they catch up.”
It’s a reflection of the growing number people turning to tracker mortgages, which are linked to the Bank of England base rate. This happened as fixed mortgage rates continue to remain high, even though they are starting to fall now.
Traditionally, most landlords have opted for a fixed deal because it offers more certainty, but with prices soaring, trackers are proving to be a cheaper alternative.
Andrew Montlake of mortgage brokers, Coreco, said: “Right now trackers are much more popular than they have been for many years.
“Lenders will look at their business they are entering and try to manage the flow of applications to maintain service.”
One of the reasons they’re becoming so popular is that many of them don’t have prepayment fees, which means landlords can use this type of agreement as a “stopgap” while waiting for fixed rates decrease.
And since interest rates on trackers track that of the base rate, currently at 3%, offers are often significantly cheaper.
For example, with First Direct, mortgage holders could pay a rate of 4.94% on its follow-up offer, with a 25% deposit and a minimum charge of £490.
Those who do not wish to pay a fee will be offered a rate of 5.09%, also with a 25% deposit.
Meanwhile, the average two-year fixed contract currently stands at 6.33%, while five-year contracts are now at 6.11%.
Although they are slowly decreasing, they are far from being the best mortgage rates today.