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Lenders’ tracker mortgages ignore ‘base rate effect’ – Moneyfacts

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  • 11/10/2016
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Lenders’ tracker mortgages ignore ‘base rate effect’ – Moneyfacts
The average two-year tracker rate has increased by 0.07% in just one month, despite Bank Base Rate (BBR) being cut to 0.25% in August, Moneyfacts data reveals.

The financial information provider said that the hike brings the figures back to July 2016’s level and completely cancels out the “base rate effect”.

In July, the average two-year tracker rate was 2.01%. Following the August cut, it dropped to 1.94% but lenders have pushed it back up to 2.01% today.

Charlotte Nelson, finance expert at Moneyfacts, said: “After the average two-year variable rate reached an historic low in September following the Bank of England’s cut to base rate, a logical assumption would have been for the market to stabilise at this new low. Instead, it has increased back to the level it stood at shortly after the EU referendum. This increase has effectively offset any reductions that may have occurred after the base rate announcement on 4 August.

“This increase to the average two-year tracker rate reflects the uncertainty in the market. Providers are facing heightened risks as a result of the wider economic issues such as house price stability and a potential increase to the inflation rate, which may affect household expenditure. This has likely made the low level seen in September unsustainable.

“With the fixed-rate mortgage market highly competitive and lenders preferring to lock borrowers in for a longer term, there is no wriggle room to increase rates in this area. So, the variable-rate market is an easy target for increased rates.”

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