Three-month Libor rates are currently 1.87 per cent, 1.37 percentage points above Bank of England bank rate of 0.5 per cent, but advisers say this is not fairly reflected in current tracker rates.
Mortgage expert Jonathan Cornell warns there is effectively no competition in the mortgage market now, making Libor-watching irrelevant.
He says: “If you look at Libor and tracker rates right now, there are still huge margins being made. Libor has been falling and swap rates are down but it is not filtering through. The rates are not going down.”
John Charcol senior technical manager Ray Boulger says lenders are increasing their margins on trackers so that anyone taking out a tracker now will suffer a payment shock when the bank rate goes back up.
Boulger says the gap between bank rate and Libor is such that lenders are trying to lock in tracker borrowers for longer periods to take advantage of the spreads.
He says: “Halifax, for example, has a slightly cheaper five-year tracker compared with its three-year tracker to take advantage of the big margins that we have right now.”