Tracker rate rises for several big mortgage lenders do not indicate the US sub-prime crisis has hit the UK prime market, according to moneyfacts.co.uk.
Several UK lenders have raised rates on tracker mortgages for new customers by between 0.1% and 0.25% in the last few days.
However, Julia Harris, mortgage expert at Moneyfacts.co.uk, says the rising rates are most likely a response to competitive pressures rather than hedging against mortgage market uncertainties.
“It is far to early for the crisis to have reached the prime market, with tracker mortgages often financed from the lender’s balance sheet, and only a few known lenders reliant on the current volatile LIBOR market. If the provider remains liquid, the UK housing market stable and arrears low, there is no immediate concern”, she says.
Harris also says the spate of rate changes seen in the last few days is sparking unnecessary worry, which could make the situation worse.
Despite the rise in tracker rates, lenders have also been lowering prices on their fixed rate products.
Harris says the decision to raise tracker rates may be due to banks factoring in a base rate rise to 6%, which has yet to materialise, or because a lender wants to increase or decrease its market share or to stay in line with its competitors as part of its current strategy.
Harris believed the prime mortgage market is unlikely to be affected by the US sub-prime worries, but adds: “If we start to see more significant and prolonged increases, or standard variable rates begin to rise, then it may be a sign that the market is suffering at the hands of its investors.”
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