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To Track Or Not To Track, So Many Questions!


Whilst I have been away for a week in the deepest recesses of Longleat Forest, I have been keeping up to date with the various comments by the great and good around the future of Bank Base Rates and mortgage products generally.

There are some very interesting observations to be made around some of the comments made.

One question is the recurrence of the old favourite as to whether a discounted rate linked to a lenders own variable rate or a Bank Base linked tracker is better advice. Traditionally most brokers and journalists state it would be better to take a product that tracks the Bank of England Base rate rather than a product linked to the lenders own variable rate. Simple reason really, historically speaking lenders have often failed to pass on the full cuts and increased their own rates over and above the Bank of England’s’ own rise.

However, I did note one comment that raised a very interesting point. That is the fact that the margin between variable rates and Bank Base is much larger than it has been for many a year. The question is therefore is this just the new norm? When rates rise are lenders going to keep increasing their variable rates in line or even by more as they have been known to in the past, or is the margin going to “normalise” as Bank Base rises and lenders not pass on the increases as competitive pressures return to the market?

I guess it depends on your view of lenders, particularly certain lenders, and there are more than a few cynics amongst us who would question whether lenders will look out for their customers or keep raising rates.

For me over the next 2 years at least I still see sense in linking to Bank Base rather than be left at the whim of a lender who may need to increase their rates by more than any modest increases in Bank Base we may see in the short-term.

In the long-term however it does seem more unlikely that certain lenders will be able to keep the gap between Bank Base and their variable rate so large. As ever it is another important thing to take into account when looking at which lender to go for. Headline rate is nice, but it is not the be all and end all for many when they start looking at the nitty gritty.

With the number of products increasing once more, a plethora of products available from different sources and increasingly confusing  internet based “Best Buy” tables that sometimes promote their sponsored products at the top rather than the actual very best products, advice seems more important than ever.

On the insurance side of things we have already seen providers such as Direct Line and Aviva saying their products are not available on internet Best Buy tables, so how long before some lenders follow suit?

In the Large Mortgage Loan sector this is already the case, with most of the best products not available on any search provider. At this end of the market, only an experienced Mortgage Broker can really assist, unless you have the time to contact the many private banks who dip in and out of the market at this level.

Now of course I would say that, but it is true.

It’s good to be back.

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