Co-op withdraws tracker mortgages

oneswig

Hi -

I was just on the phone to the Co-op bank to remortgage my (expired) tracker with them, and they apparently no longer offer tracker mortgages of any form. Their website now presents fixed rate mortgages only.

Is this part of a wider pattern or specific to the Co-op's particular problems? Is it because tracker mortgages are less profitable to the lender?

ACG

I think this is co-op specific. Their tracker rates were always pretty good - especially when i worked there... but even with the good rates, people in the main wanted fixed rates.

opinions4u

Withdraw some of your product range = lend less.

Logical idea for a bank up the creek.

Thrugelmir

oneswig wrote: »

Is this part of a wider pattern or specific to the Co-op's particular problems? Is it because tracker mortgages are less profitable to the lender?

With no rate increase likely in the foreseeable future (at the current time). Then trackers would have to be offered at a high margin above BOE base. Resulting in low customer demand.

kkgree1

Looks as if Britannia (part of Co-op) are still offering tracker rates though. I am also not surprised Co-op have pulled their tracker rates particularly with their client base. I suspect they aren't making enough money from them at the current time!

Caladan

HSBC is maneuvering customers towards fixed rates as well (if you follow their rates you'll see the fixes are almost as low as, if not the same as, tracker rates) and they offer cash-back for new or existing customer taking out a fixed rate deal.

Our economists are of the opinion rates will rise sooner rather than later, they'd rather have customers on fixes than have to deal with a shed-load of financial difficulty cases from people on trackers (I know, I'm such a cynic).

Trackers probably aren't making much money now, and the market got crazy competitive over them for the last couple of years, hurting profit margins further.

jamesd

Can't dispute whether the economists have that opinion but:

Customer is on fixed deal. Two or three years from now, Bank Rate has gone up, customer now goes to reversion rate or, if still able to meet criteria somewhere, remortgages. If not able to meet criteria they become a trapped borrower and subject to the FCA guidance for those.

Customer is on a tracker deal. Two or three years from now the customer is on the tracker rate still, which is likely to be lower than an SVR-type reversion rate, so customer has less financial stress than the one who used the fix. And no need for the customer or bank to worry about possibly tougher underwriting criteria that might make them a trapped borrower.

Then there's the FCA guidance on minimum interest rates to use when calculating affordability with the interest rate stress test to consider. I don't know what those currently are but I assume at least five percent, quite possibly six. I doubt that HSBC will be ignoring that guidance and doubt that HSBC's economists expect mortgage rates to be above that level within the term of the fixes being considered here.

So the financial difficulty reason given doesn't seem to make much sense for commonly available two or three year fixes, given the opinion of the economists. Not that this stops the economists and bank having those views and acting on them, of course.

Gorgeous_George

Banks offer deals that they want you to have.

If the Coop have stopped offering trackers it is because they see more profit in fixed rate deals.

I'm happy to stick to my BofE +0.74% lifetime tracker with Britannia for the time being.

When was the last time the so called experts were right? It was professionals that got the country into this mess.

You pays your money and takes your choice.

GG

kingstreet

Gorgeous_George wrote: »

Banks offer deals that they want you to have.

and for which they can arrange profitable swaps.

If Co-Op is having trouble getting those swaps at a decent price, it's cupboard will start to look a bit bare, sooner or later.