Mortgages Latest - UK Housing Market - Tracker Mortgages

Despite claims of a housing market recovery and greater availability of mortgage finance, the figures released by the comparison website Moneysupermarket show that the alarming fall in available mortgage products has continued.

The tracker mortgage market has been the worst hit, with the number of available products falling 81 per cent since July last year, whilst the number of fixed rate mortgages has fallen by 46 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.

"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,” commented Louise Cuming, head of mortgages at moneysupermarket.com.

"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.

Tracker mortgages have become popular with consumers over the last few months – where they are available – because the monthly payments have fallen dramatically as the Bank of England base interest rate has fallen considerably. This has meant however that many banks with tracker deals have seen their profits fall even further at a time when they are suffering.

"My concern remains around the lack of choice,” continues Cummings.

“Fixed rates, tracker rates and SVR products all have a place to meet individual needs which are all different. Now more than ever there cannot 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.”

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. But remember, the current low base rate will, eventually, begin to rise, bringing trackers more in line, but less reliable, than a fixed rate mortgage.

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