Tracker Mortgages - Can the banks do this???!!!

BradfordBull

Our tracker tracks the Bank of England base rate +0.34%.

I think 'tracker' usually refers to 'base rate trackers' which follows the BOE base rate (now 4.5%) rather than a mortgage which follows the banks own base rate (often much higher) & which is really just a variable rate mortgage.

BB

Lemoncurd

Think it depends on the individual product. We have a base rate tracker and from memory if you took out the 5 year discounted version they imposed a lower limit of around 3%. If you took out the versions with only a 2 or 3 year discount period (we chose the 3 yr) there was no lower limit on the tracker.

BradfordBull

what bank is your mortgage with Lemoncurd?

Lemoncurd

First Active

BaileyB

Nationwide is 2.75%

space_rider

I`ve read the mortgage booklet and also the KFI and I can`t see where it says there is a floor on the tracker. Still like someone said, let`s see if it does drop below 3%!

BradfordBull

The country is in deep and interest rates are gonna drop like a stone for the next 12 months I reckon...

This is obviously an issue affecting quite a few at the moment. There are 2 or 3 other threads discussing this on the mortgage board ( "interest rates down to 1%@ thread etc etc)

The consensus seems to be Read the KFI (done) read the T&C's (done) but understand that most mortgages T&C's are worded something along the lines of "we can vary the conditions at any time for a valid reason"

No mention of what is a valid reason...?

I think those on base rate trackers will benefit from interest rate drops for a while (maybe to 3%ish) until it becomes too unprofitable for the banks. Then the "valid reasons" will kick in and trackers with no floor or collar will get one.

BB

thetigerwhocametotea

Hi BB

You are right.

I have recently posted about the wording on my tracker mortgage which I will revert to in Dec when my fixed rate ends. Like you I was thinking I will be quids in if the BofE base rate drops again and, like you, I have read and re-read the Key Facts where there is no mention of a collar, only the 'valid reason' bit you refer to.

I phoned the B Soc this morning and spoke firstly to an idiot who had no idea what I was talking about and then eventually to someone with half a brain who said basically yes, if the BofE rate drops 'too low' they would be within their rights to alter the rate at which they track. I asked her to explain why this was classed as a 'valid reason' but she said 'I'm not entirely sure I can explain'. Great help. Suppose I'll just have to wait and see.

So, as I said in my other post, they can basically do what they like and we can sod off if we don't like it.

mrcow

This is very interesting.

I have a standard C&G lifetime tracker mortgage and was convinced that I knew of a similar clause in it.

I have however today been through all my mortage paperwork and T&Cs and can't find anything at all on it on anything that's been signed or any additional T&Cs they've sent through saying that my tracker won't do anything other than track at BOE base rate (I tend to keep everything).

Rikki

I just thinking. I can't see the banks saying this if base rate falls too low.

'Money for nothing and the bricks for free.'


*I'll get my coat*