A little known fact about trackers

koexelek

Under the terms of their tracker products, a lot of lenders specify a percentage where, if the Bank of England rate goes lower than this, they are no longer obliged to pass on the rate cuts.

For example Halifax, Skipton, Accord and Yorkshire Building Society set this rate at 3%, and Nationwide set it at 2.75%

Although the Bank of England are probably unlikely to cut rates this far, it is something worth bearing in mind.

lisyloo

Although the Bank of England are probably unlikely to cut rates this far

You reckon?
I'm not sure I agree with you.

But if it does happen people with trackers could easily move if there are better deals around.

herbiesjp

And some can change the tracking margin

koexelek

lisyloo wrote: »

You reckon?
I'm not sure I agree with you.

But if it does happen people with trackers could easily move if there are better deals around.

I hope you are right !

Trouble is though, most of the good trackers lock you in for the early years, so you can't jump ship as easily as that

foreversummer

Which ones change the tracking margin. I didn't think this was allowed once you have a tracker mortgage.

Gorgeous_George

All sorts of things may seem to be allowed because it is in the small print. However, these things may be considered unfair terms and could be challenged.

I'm with Britannia and cannot find such a term. However, as they are a Building Society and I am a member, I would vote for the imposition of a minimum rate to protect the long term interests of the Society, should the need arise. 3% would be fine by me.

GG

opinions4u

When the "floors" were put in on trackers, wholesale funding was easy to come by and many trackers were "BofE minus 0.99%" or such like. Some even more generous.

There was a potential risk to lenders that if we ended up with Japanese interest rates (below 1% at the time) that they could actually end up with a negative interest rate. Meaning the lender pays you for borrowing money!!

Having a floor makes absolute sense, because banks have to pay to raise the funds so need to charge more to those they lend on to.

Whether they enforce a floor will depend on the competitive situation at the time, together with the cost of raising funds via LIBOR and savers. If it happened today, they would have to enforce it.

Would love to know those that vary the tracker differential though! Shout up chaps. Name and shame!!

lulu999

Their ultimate weapon is that they can quite simply just ask for their money back, irrespective of all other terms conditions, small print, etc, etc.

herbiesjp

foreversummer wrote: »

Which ones change the tracking margin. I didn't think this was allowed once you have a tracker mortgage.

Abbey - on their Flexi mortgage have a collar of a BoE rate of 3%, and they reserve the right to change the tracking differential should the BOE go less than 3%.

They reserve the right to increase the tracking margin by more than the drop below 3% as well

They also reserve the right to maintain this higher differential even if a later increase takes BoE to 3% or more

lisyloo

Yep I noticed in my Ts&Cs that the mortgage is due "on demand".

Previously I would have said such a thing was inconceivable.
I think lenders wouhave trouble getting their money if they did this on any kind of scale as there are so few buyers, so it would be pointless.

lulu999

It was drawn to my attention by my account manager when we were discussing transfer of mortgages should the bank go under or get taken over, whether the terms would remain the same if the mortgage was taken up by another bank, etc. He thought they wouldn't necessarily, I argued that the terms couldn't be changed, which elicited his answer I posted earlier about altimately just asking for the money back. It stopped me in my tracks. (Wish I had a lousier mortgage rate now!!!)