The number of tracker mortgages on the market has fallen by a third since the Mortgage Market Review (MMR) came into force in April, and is now at the lowest level since December 2009.
Which? analysis of Moneyfacts data reveals that all types of variable mortgage deals have reduced in number since the MMR came into force in April. But tracker mortgage deals, which follow the Bank of England base rate over an initial period (typically two years), have seen the biggest cuts.
In April, the total number of tracker deals stood at 482, but this fell to 330 by early August.
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Change driven by Lloyds Bank and Halifax
Lloyds Bank and Halifax, which together offered nearly a third of all tracker deals at the start of April, have driven this change by chopping a total of 137 deals from their selections – accounting for 90% of the 152 trackers dropped overall.
Lloyds currently offers no trackers at all, while Halifax sells a selection through intermediaries. Two other building societies – Furness and Skipton – have also removed trackers entirely from their selections.
Lloyds said it had made the reductions in the interests of its customers because the rates of its fixed mortgages, which guarantee a rate over the deal period, had dropped to become comparable with its trackers. This meant that trackers, which carry the risk of increased rates if the base rate changes, were becoming poorer value for money.
Lloyds denied that its decision was motivated by the MMR. However, the combination of the review and possible increase in the base rate may make trackers and other variable rate mortgages riskier for lenders as well as for customers – meaning the trend could continue.
Find out more: What is a tracker mortgage? – Which? explains the pros and cons of this type of mortgage
Fixed rate deals increasing
Of the 11 lenders with the biggest range of trackers in April, five cut the number they offer between then and August. Meanwhile, eight lenders, including Nationwide and Santander, reduced their selections of trackers in proportion to other types of mortgage.
Skipton, which has scrapped all ten of its tracker deals, told us that its decision followed a ‘period of very low demand’ for trackers and an ‘overwhelming’ preference for fixed rate mortgages.
Since April, the number of fixed deals has increased as a proportion of the residential mortgage market, at 72% in August compared with 66% five months ago.
Find out more: Fixed mortgages – we explain the advantages of choosing a fixed-rate deal