Tracker mortgage withdrawal could prove a shock to homeowners

The withdrawal of 23 tracker mortgage deals may prove to be a shock to homeowners once they end their current deal, it has been claimed.

Al Elliot, an advisor from the Homeowners Advice Centre, said that current fixed rate mortgage deals were very expensive, but that they offered the only real option to borrowers who were seeking new finance.

"When base rates do return to normal levels — about four to five per cent — the solution seems to me to be to re-introduce ‘cap and collar’ mortgages that were big in the late 80s," he said.

So-called 'cap and collar' mortgages involve the lender stipulating that the borrower's mortgage will track the Bank of England base rate, but has a maximum interest rate customers will have to pay — as well as a minimum.

Price comparison site Moneysupermarket.com reported earlier this month that 23 tracker mortgages had been withdrawn since the base rate was cut to three per cent on November 6th.

Mortgages News posted on 14/11/2008 15:31:22