Are tracker mortgages facing extinction?
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Number of tracker mortgages available drops 81 per cent in 12 months
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Number of one year tracker deals falls by 99.6 per cent
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Number of total mortgages available falls 59 per cent
The biggest drop has been in the number of one year tracker products available, which has fallen from 522 on July 1st 2008, to just two remaining today, a fall of 99.6 per cent. Over the same period the number of two and three year tracker deals has fallen by 74 per cent and 73 per cent respectively.
Number of available tracker mortgage products:
|
Date |
1 Year Tracker |
2 Year Tracker |
3 Year Tracker |
5 Year Tracker |
Term |
|
20th July 09 |
2 |
145 |
141 |
18 |
60 |
|
1st July 08 |
522 |
548 |
519 |
7 |
341 |
Louise Cuming, head of mortgages at moneysupermarket.com said: "The fall in tracker mortgages highlights how the last 12 to 18 months have seen a complete meltdown in the mortgage market. The figures show that four out of five tracker products available 12 months ago, when the Base Rate was at five per cent, have disappeared.
"Whilst it may not be surprising to see lenders pulling these products, it is a stark reminder that lenders call the tune and competition is no longer the name of the game. The flight of borrowers to fixed rates has definitely been precipitated by lenders who have decimated the choice of tracker rate alternatives."
The last 12 months have seen tracker mortgage rates rise in relation to the Base Rate. The average of the best two year tracker from each of the main providers currently stands a little more than 2.5 per cent above the Base Rate, whereas 12 months ago the same figure was just 0.9 per cent above the Base Rate.
Louise Cuming continued: "Banks which had large number of tracker mortgages on their books have had their fingers burnt by the dramatic fall in the Base Rate. It isn't surprising that they are now a little unwilling to get back into that market, especially with the Base Rate remaining so low. At the same time, customers may be concerned that a tracker mortgage at 2.5 per cent above the Base Rate could quickly become very expensive.
"My concern remains around the lack of choice. Fixed rates, tracker rates and SVR products all have a place to meet individual needs which are all different. Now more than ever there can not be a 'one size fits all' solution to increasingly complex needs. Unfortunately, given the low appetite for volume lending, providers no longer have the competitive drive to deliver choice. In the end, this means borrowers suffer.
"For consumers looking for a new mortgage, the near entire absence of tracker products shouldn't put you off looking around for them; the trackers that are still available are generally much cheaper than the equivalent fixed rate deals.
"The decision between a tracker and a fixed rate is always somewhat of a gamble, and whilst some people like the certainty a fixed rate mortgage affords, the savings on offer from tracker mortgages are hard to ignore. Almost everyone agrees that the Base Rate must eventually rise, but no one knows quite when this will happen, and if rates remain flat for another six months or so, those opting for tracker may save hundreds of pounds."
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