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The new Woolwich mortgage deal is called the Step Tracker. Its headline starting rate of 1.98% is available to borrowers with 40% deposit or current equity in their property. But with a rate this low you'd expect a catch, and yes, there's a substantial one. The discounted tracker rate – 1.48% on top of Barclays Bank Base Rate (BBBR) – only applies for the first year. After 12 months, it reverts to a lifetime rate of BBBR plus 2.49%. There's also an Early Repayment Charge (ERC) for the first three years, requiring you to pay two per cent of the sum outstanding if you re-mortgage during that period.
Also, Paragon Mortgages has just released figures showing that nearly 7 in 10 mortgages submitted through mortgage advisers in April, May and June this year were for fixed-rate deals. This is the biggest proportion of fixed rate mortgages since Paragon started surveying the market in 1996. The most popular fixed-rate mortgage term was 2 years. Meanwhile, tracker mortgages fell to only 26% of applications.
The new regulations will have an opposite effect of increasing costs and tightening credit. A more effective solution would have been to proactively police loan transactions in real time and there by preserve robust competition amongst many lenders while educating consumers at the same time.
Dual pricing, the habit of lenders offering special deals to applicants in branch or via the lender's website, is a practice loathed by intermediaries (advisers, IFAs) as it puts them in a no-win situation. They have to offer customers best advice, meaning that with dual pricing they feel the obligation to tell clients to pop down the road themselves, earning no fee in the process. Advisers could charge an upfront fee for this kind of advice, but they fear this will turn customers away.
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