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Jul 24, 2006
A Moneyfacts
analyst has issued a warning to consumers to take note of misconceptions
regarding variable rate mortgages. With several lenders recently taking the
decision to increase their standard variable rate (SVR), Darren Cook, Head of
Mortgage research at moneyfacts.co.uk, says borrowers should not assume that
their rate is safe just because base rate has remained unchanged.
Evaluating the
behavior of tracker rates, Cook explained: “Usually tracker rates will track
the Bank of England base rate, either at the same level, with a loading or at a
discount. So consumers can be confident their rate will remain stable, as long
as base rate does not change. However discounted rates can also be impacted by
internal bank decisions, as the rate is normally discounted from the lender’s
own SVR. We have seen these can and do change in times of base rate stability,
and are affected by both micro and macro decisions, something which may not be
easily predictable.
Cook further
warned that although lower rates can currently be found on discounted
mortgages, borrowers must remember that they are at the mercy, to some extent,
of the lender as to whether this rate fluctuates. “As the mortgage market
becomes increasingly complex, it is worth investing the time to research the
market and speak to an IFA, who will help you find the most suitable deal based
on your individual financial, family and career plans both now and in the
future,” Cook added.
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