New tracker mortgage from Alliance and Leicester - good or bad?
From today Alliance and Leicester will offer a new 2 year tracker mortgage to new and existing customers.
The 2 year base rate tracker mortgage
- 5.98 per cent - which is Base Rate +0.98 per cent, then Base Rate +1.49 per cent
- Customers can borrow up to 75% of the property value
- £999 product arrangement fee
- Maximum loan - £1 million
- Full flexible features
It’s good to see a fairly competitive interest rate with the added benefit of a reasonable product arrangement fee. I say ‘reasonable’; personally I think mortgage fees are a rip off becuase the lender is providing mortgages to people every day, at the very least I think there should be a cap on mortgage fees. However, in today’s market a fee under £1,000 is a good start.
It’s also quite a warning sign for me that all the tracker mortgages seem to have competitive interest rates and low fees at the moment, compared to fixed rate mortgages. I say this because industry experts are predicting interest rate rises in the coming months, no-one knows when exactly of course but I’d say interest rates will rise again before the end of 2008.
This means that everyone taking out a tracker mortgage now will end up with higher monthly payments by the end of the year.
It seems like lenders may be trying to attract new customers with the low fees and relatively low interest rates of a tracker mortgage rather than a fixed rate mortgage. No wonder the fees and interest rates of fixed rate mortgages are increasing - lenders don’t want people to take out these products so they’re pricing consumers out.
I suppose mortgage lenders are running a business and it’s up to them to determine the fees and charges they impose on customers. One thing is for sure though - you have a choice so make sure you research carefully before making a decision and seek professional financial advice if you’re unsure.
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