The Guardian on Saturday revealed that some of Britain’s biggest lenders have small print terms which allow them not to pass on rate cuts, even if the contract says the loan is tied to the Bank of England base rate. Reportedly, several banks and building societies impose a ‘collar’ on their tracker mortgages that limits how low a borrower’s pay rate can fall, irrespective of any base rate cuts. There was similar gloom in the Sunday Times, which revealed that as many as 49% of homeowners who have taken out a loan since the start of 2007 have borrowed more than 75% of the value of their property. Most lenders restrict their best deals to those with a deposit or equity of 25% or more, meaning many borrowers will be unable to get a good remortgage deal and may be forced onto the standard variable rate.
Elsewhere, the Observer looked at Abbey’s ‘First Home Saver account’, which pays 8 per cent AER and is available only to aspiring home owners aged 16 to 35 who want to build up a deposit. Although Abbey insists on that first-time buyer undertaking a consultation with their mortgage adviser, it hasn’t made the savings rate contingent on an Abbey mortgage being taken. Experts advise shopping around the secure the best possible rate. Finally, experts in the Mail on Sunday are predicting an epidemic of ‘purchase regret’ in the coming months as people who chose fixed-rate mortgages this summer realise they are marooned paying far more than they could have been. As recently as July, the average rate on a 2-year fix was as much as 7 per cent- and the Council of Mortgage Lenders says up to seven in ten borrowers picked fixes over variable-rate alternatives such as trackers.