Talk Money

According to mortgage broker John Charcol, tracker mortgages offer better value than fixed-rate alternatives. Charcol’s confidence in trackers comes from the small number of mortgage lenders who have who have lowered lending rates in line with the Bank of England’s recent interest rate cut.
For some time Ray Boulger, Senior Technical Manager for John Charcol, has been recommending trackers to people taking on variable mortgages. He said:
“We have seen over the last few years there is always a proportion of lenders who do not move their rate in line with the Bank’s rate. Most of the time a tracker mortgage is a quarter of a percentage point higher than a fixed rate mortgage, providing the starting point is good.”
Mr Boulger noted that because of the credit crunch, mortgage lenders were cutting down their portfolios, to mitigate any risk.  However, he predicted, that trackers will be available as no restrictions will be placed on them as base rates fall. Despite his belief in the value of tracker mortgages, Boulger does not envisage a rise in consumers switching mortgages, he said:
“The reality of people deciding to look at their mortgage product is based on whether the value of a discount mortgage is cheaper than a tracker mortgage or vice versa.”

Mortgage customers are being charged exit fees when changing lenders, despite recent campaigns by watchdogs to stop the practice. Mortgage website mform.co.uk has published research saying the average cost of changing lenders is £150, despite attempts by the Financial Services Authority (FSA) to make exit terms more transparent.
The FSA has urged lenders to make the charging of exit fees clearer, resulting in lenders including Royal Bank of Scotland , Standard Life, Cheltenham & Gloucester and Lloyds TSB dropping fees. However, many lenders are still charging over £100 exit fees with many not making charges clear to their customers or on their websites.  On top of urging lenders to drop fees, the FSA has ruled that from 2008 customers can reclaim exit fess if they pay a higher charge than set out in the original terms.
Francis Ghiloni of mform believes that stopping exit fees is good for consumers. However, he believes consumers should begin to factor exit fees into the cost of remortgaging, rather assume they are an administrative charge for closing the loan. Ghiloni said:
“ [Exit fees] should be considered at the start rather than come as a nasty surprise when its time to move on. Borrowers who regularly remortgage and move from lender to lender need to take account of exit fees as well as application fees and other costs which will have an impact on the true cost of their loan.”