Comment on First Direct's new range of tracker mortgages

Published:

07/09/2009

Topic:

Press Release,Money,Mortgages

Hannah-Mercedes Skenfield, mortgage spokesperson at moneysupermarket.com, said; "With a headline rate of 2.79 per cent, First Direct's new mortgage products certainly look appealing at first glance.

However, much like HSBC's recent sub two per cent launch, the top product is only available at 60 per cent LTV, excluding much of the market, and virtually all first time buyers. I would imagine more people will be interested by the product available at 80 per cent LTV, tracking the Base Rate plus 2.99 per cent.

"Unlike the HSBC product which is linked to the lender's SVR, this is a tracker mortgage directly linked at 2.29 per cent above Bank of England Base Rate. Whilst this makes for a cheap deal now, should rates rise it could become extremely expensive. Two years ago, the cheapest available tracker mortgage was Yorkshire Building Society's two year offer, tracking at 0.76 per cent below Base Rate*, more than three per cent less than First Direct's new product, which just goes to show even the most generous lenders have drastically increased their margins."
 
"People looking for a new mortgage deal must be wary that tracker mortgages might seem cheap now, but they have the potential to become very expensive in the next few years. Anyone looking to take out either a tracker or discounted mortgage deal should ensure that they calculate the repayments if the Base Rate were to rise three or four per cent. If you would be unable to afford the higher repayments or if you would prefer to know exactly how much you will be required to pay each month then you should consider a longer term fixed rate mortgage."

* The Base Rate at this time was 5.75 per cent

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