Borrowers who snap up large discount trackers could be credit crunch winners

Katie Tucker of John Charcol comments, “You would have to have been living on the moon to have missed the fiasco outside the Northern Rock branches since the news emerged on Friday that it had applied for support from the Bank of England. New customers have since been reassured by the government's pledge to support the bank’s funding, however, it is Northern Rock’s comparatively high pricing that is the real reason to look elsewhere. For a fully flexible 5 – 10 year fixed rate alternative, Coventry’s is cheaper at 5.99% fixed until 30th September 2017 with Early Repayment charges (ERC’s) to the same date, an arrangement fee of £999, free valuation and on remortgages, free legals.

“Unlike the sub-prime market, where tightening of criteria is abundant, criteria changes are no more prolific than normal in the mainstream market. Norwich and Peterborough has bailed out of the 95% and 100% Loan-to-value market, yet conversely, Intelligent Finance has relaxed its fast-tracking policy meaning that self-employed people with a high credit score can fast-track on cases up to 85% where it used to be 75%.”

What is available for borrowers in this uncertain market?

Tucker continues, “Three Month LIBOR remains high at 6.88% and as expected, mainstream lenders are continuing to reduce or withdraw their discounts to compensate: Halifax’s trackers have increased by up to 0.2%, Manchester Building society’s by 0.25%. However, the credit crunch is another reason that base rate is unlikely to rise again as the Bank of England try to keep borrowing as painless as possible, which means that borrowers who snap up a good discount or tracker now may reap all the rewards if Bank Rate drops even sooner than expected. Discounts from Bank Rate additionally avoid any risk that Lenders will increase their SVR’s.

“Cheltenham and Gloucester offer a 1.01% discount from Bank Rate for two years, with free valuation and legals. With an arrangement fee of 2.5% this would suit the smaller loan. Halifax’s remortgage tracker at 5.59% until 30th November 2009 is good value across the board, with free valuation and legals and a fee of £1,499. For a three year deal, Catholic Building Society offers a discount of 2.3% from its SVR for a fee of £690. This also has free valuation and legals for remortgages. “

Tucker concludes, “Swap rates are down 0.15% on the last two weeks and we expect fixed rates to become more competitive, particularly five year fixes which have dropped 0.17% on a fortnight ago. Britannia still has money on its leading two year fix at 5.49% with fee of £999.”