Lender makes the move ahead of the Bank of England's base rate decision
Coventry for Intermediaries has announced that it is closing its bank base rate (BBR) tracker rates for its owner-occupied and buy-to-let product ranges.
From 8pm, December 14, the lender is closing all BBR tracker rates – whether for new business, porting, further advances, or product transfers – ahead of the Bank of England’s announcement of a possible base rate change on Thursday.
Meanwhile, brokers are not too concerned upon learning about the announcement, with most of them saying the move is just part of the lender’s preparation for the base rate decision later this week.
“I’d be careful of reading too much into this,” Rhys Schofield, managing director at Peak Money, remarked. “With an impending Bank of England meeting, it’s probably pretty sensible to pause offering a product linked to whatever they decide to do with base rate until after the decision. Don’t be surprised to see it relaunched and repriced accordingly.”
“I think this is just in readiness of the potential base rate change this week, and that the products will need refreshing accordingly,” Justin Moy, managing director at EHF Mortgages, added. “What we need to check on is the margin over base rate that the replacement products will be, and whether that margin narrows in any way.”
“Coventry is one of the more popular lenders in the tracker space, as their products are penalty-free, meaning they offer great flexibility,” Craig Fish, founder and director at Lodestone Mortgages & Protection, said. “As tracker mortgages are proving extremely popular at present, I suspect this move is to manage workflow and volume ahead of the base rate announcement on Thursday. No doubt they will be back in due course.”
Paul Neal, mortgage and equity release specialist at Missing Element Mortgage Services, believes that more lenders will follow Coventry’s actions.
“I don’t think Coventry will be the first or last lender to do this,” he said. “As fixed rates have rocketed, we are finding more and more clients opting for variable and discounted rates. Even with the looming Bank of England rate increase, they are still a much more attractive option than a fixed rate.”
Rob Gill, managing director at Altura Mortgage Finance, pointed out that with margins as low as 0.24% above base, a falling base rate could see those who take a tracker now paying a very low rate in the next two years.
“Tracker rates have become increasingly popular in recent weeks,” he added. “Not only are they significantly cheaper than fixed rates currently, they also offer the tantalising prospect that base rate may start to fall next year as inflation recedes and we enter recession.”
