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Lloyds re-launches tracker mortgage

But bank will increase its margins on the deal

Lloyds TSB Advisor

What does the merger mean for the banks’ customers?

LloydsTSB has relaunched its tracker mortgages but it increased the margins it charges on the deals.

The group, which includes the Cheltenham & Gloucester brand, is now offering a three-year tracker mortgage for someone with a 40% deposit who pays a £1,995 fee of 3.69% or 2.69% above the Bank of England base rate.

It had previously offered a two-year tracker rate under the same terms at 2.29% above base rate, giving a rate of 3.79% when the base rate was at 1.5%.

To find out if it’s one of this week’s best mortgage deals, see our mortgage finder.

Group defends decision

People with only a 25% deposit will now pay 2.99% above base rate, rising to 3.59% above it if they opt for the group’s fee-free deal.

Lloyds defended its decision to increase its margins, saying that the key inter-bank lending rate Libor, had fallen very little since the Monetary Policy Committee reduced the base rate last week.

A spokeswoman said: ‘The Libor has barely moved at all since the last base rate reduction, so our funding costs have not got any cheaper.’

Matching the market

The group withdrew its tracker range, which consisted of two-year and lifetime loans, ahead of the MPC’s announcement in early February.

It’s replaced them with a three-year tracker which it says ensures its products are in line with those offered by the rest of the market.

Lloyds has already said it is reducing its standard variable rate by the full 0.5% but other lenders have been slower to respond

Only 14 groups out of 90 so far have said they’ll be passing on between 0.19% and 0.5% of the cut. 

For more on the meaning of rate cuts for homeowners and savers, see our money podcast.

© Press Association 2009

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