Lenders Get Creative With Mortgage Deals

by Mark Johnston

Thousands of borrowers are due to finish their current deals and will be moved onto their bank or building societies standard variable rate (SVR). Due to the low bank of England base rate of just 0.5%, many Britains are staying on their lenders variable rate. This was once seen as the more expensive rates but some are seeing this as their best or only option.

Low standard variable rates have created borrower inertia so lenders are having to compete to get customers onto their deals. This has created some healthy competition which has led to some interesting products and great offers. In the past lenders have sold fairly dull and uninteresting products but many are now seeking new creative ways of attracting customers by being flexible and innovative.

There are around 700,000 customers on standard variable rates (SVR) so Uk lenders see this as a massive opportunity to expand their mortgages ranges and attract new customers.

The Bank of England base rate is currently as a 20 month low of 0.5% so many borrowers have chosen to remain on their banks standard rate instead of fixing their mortgages or moving to a tracker. Many economists are predicting a arte rise soon but its hard to say when and to what extend. The only thing that is sure is that, with such a low rate the only way it can go is up.

Those that have found their current deal coming to an end and have decided to remain on the standard variable rate (SVR) should consider that there are some fantastic opportunities for borrowers to take advantage of.

The telephone bank, First Direct has launched a tracker mortgage that tracks the base rate at just less than 2 percent. Richard Tolchard, Senior product manager pointed out that savvy borrowers could save money by switching to a First Direct mortgage. He pointed out that the Council of Mortgages Lenders (CML) had recently released a report that showed that offset mortgages had risen and now accounted for 11 percent of all new mortgage approvals.

Mr Tolchard said: “We’ve always known how great the offset mortgage product is, so it’s pleasing to see that the public are starting to realise it too,”.

First Direct offer an offset mortgage that provides a 4.4% interest rate on savings whilst providing a great rate of interest on a home loan.

First Direct’s sister company, HSBC is currently offering a tracker mortgage as 1.69% over the Bank of England base rate of 0.5% giving a great overall rate of 2.19%. HSBC is only charging a very reasonable £99 application fee although the down side is that borrowers require massive sixty percent equity as the loan to value to a mighty 40%.

Barclays ‘Great Escape’ lifetime tracker offer works out at 2.58% which tracks 2.08% above base rate. The best part is that Barclays aren’t charging any fees so valuation, arrangement and legal fees are all free.

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