Thousands of homeowners with tracker rate mortgages could miss out on the recent interest cuts, because of small print restrictions denying them from falling below a minimum threshold.
With the recent half a per cent rate reduction and further cuts predicted, many borrowers will not feel the benefit of reduced monthly repayments, as the lenders fail to pass on any benefit to customers.
For most lenders the minimum threshold is around 3 per cent, but many economists anticipate that interest rates may well fall below this over the coming eighteen months.
Other lenders without set thresholds have included caveats in their terms and conditions allowing them to not pass on rate cuts if there is are “significant” changes in the mortgage market.
According to the Council of Mortgage Lenders, around a quarter of all mortgages taken out last year were tracker deals. In recent years tracker-rate loans have increased in popularity, as borrowers have decided on loans that follow the base rate.
Ray Boulger, of mortgage broker John Charcol, said: “If people buy a tracker mortgage they expect their rate to move in line with base rate. They will be shocked to learn that their rates won’t do that. A tracker ought to do what it says it on the tin.”
Chiltern’s Nathan Gladwell says: “Despite attempts to boost the economy and help alleviate the pressure on household expenditure, there are still underhand clauses to restrict any benefits felt from reduced interest rates.
“This could deny a family with an average £150,000 tracker-mortgage of around a thousand pounds a year, if interest rates fall to 2 per cent as predicted – which would be sorely missed in the current climate.
