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Tracker fees treble in 2008

The average fees charged on tracker mortgages have trebled from £239 to over £750 in the last year.

New analysis from Mform.co.uk also found that average lifetime tracker rate mortgage is now 1.636 per cent above the Bank of England base rate – more than five times the 0.3 per cent gap last year.

The website says these margins will have to reduce if confidence is to return to the mortgage market.

Mform says the decision of some lenders including Abbey and Nationwide to not cut tracker rates in line with last week’s Bank of England 0.5 per cent cut shows the scale of the challenge ahead for lenders and borrowers.

It found that average rates on trackers were 6.056 per cent in October 2007 when the Bank of England base rate was 5.75 per cent and were 5.950 per cent when the Bank of England rate was five per cent. Since last week’s 0.5 per cent rate cut the average has actually risen to 6.136 per cent.

Over the past year mform says lenders have steadily been increasing the rate they charge new borrowers above base rate. In October 2007, lenders were charging base rate plus an additional 0.306 per cent meaning that the average rate came to 6.056 per cent.

By March 2008 when the base rate had been cut by 0.5 per cent to 5.25 per cent average rates dropped slightly to 5.950 per cent, but the charge above base rate increased to 0.598 per cent.

Mform.co.uk marketing and business development director Francis Ghiloni says: “In the past a tracker mortgage meant you’d pay base rate or a rate close to it but over the past year we’re increasingly seeing major lenders charge a premium for what has traditionally been a popular product.

“Fees have risen too and last week Abbey for example said that new customers would not receive the 0.5 per cent rate cut and Nationwide followed suit this week.

“For confidence to return to the market lenders have got to more closely reflect the Bank of England base rate. Otherwise it looks like they are improving their margins and not helping customers.”

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