Birmingham Midshires Tracker Rate Mortgages Jump To 3.75% – 5.99%.
Jump to Section…
- Introduction to Tracker Rate Mortgages
- Historical Bank of England Rates
- Switching V Remortgaging
- Birmingham Midshires Current Products
- How To Switch Your Rate
Op-ed Article updated on 02/09/2022 – BoE Base Rate = 1.75%
Tracker Rate Mortgages
Like most mortgage providers, Birmingham Midshires offers tracker rate mortgages. Tracker rate mortgages essentially track the Bank of Englands (BoE) base interest rate and are priced usually a % above the BoE’s base rate. When the BoE rates are increased, the tracker products rate would also increase. It is worth noting that historically there have been tracker products that have been priced a % lower than the BoE’s base rate ! of course this was during times when BoE’s rate was significantly higher than it is now.
the key benefit of a tracker product would be taking a risk (or view) that the BoE’s rate would remain reasonably low and so the tracker rate would remain low. *Fixed rates traditionally would be priced in higher than a tracker rate.
Tracker rate products have a defined initial deal term – say 2 years, 3 years, 5 years and above – some tracker products are for the full mortgage term. These mortgage products are known as lifetime tracker mortgages or full term tracker mortgages.
since the BoE raised interest rates to the current high of 1.75%, existing Birmingham Midshires customers that were on full term mortgage tracker products have found themselves paying a tracker rate of between 3.75% – 5.99%. Compared to the original tracker products that would have offered a product rate of around 2.5% this would substantially increase monthly mortgage payments.
For BTL mortgage customers who have Birmingham Midshires mortgages – tracker rate mortgages have been popular. The UK has enjoyed record low BoE interest rates for over 15 years and so the tracker rates have been very competitively priced. The stability of low BoE rates has meant many mortgage customers have either elected to opt for full term tracker products or regular product switching of 2 and 5 year fixed rates.
Bank of England Rates
The Bank of England (BoE) is responsible for overseeing United Kingdoms monetary policy, producing currency and overseeing payment systems. The BoE works to ensure the cost of living is stable and money has a stable and strong value. The BoE has a number of key targets to ensure the economic system in the UK functions well. From the perspective of Mortgage Lending (and borrowing) the ‘Base’ bank interest rate is key – this essential index is what most mortgage lending and borrowing is indexed against.
The UK government has asked the BoE to keep inflation at 2% – it is currently sitting at over 10% !. [ Source ONS ]. Unfortunately for mortgage borrowers one of the measures the BoE uses to keep inflation stable and low is to increase the BoE base rate.
The three graphs below provide a useful insight into the correlation between historical Interest Rates, Inflation Rates and average Mortgage Borrowing Rates. The data has been adjusted (smoothed) to allow a comparison over a matching period.
Graph 1 – Historic Bank of England Interest Rates (source BoE)
Graph 2 – Historical UK Inflation Rates (source ONS)
Graph 3 – Historical Average UK Mortgage Rates – weighted (source Trading Economics)
Switching Versus Remortgaging
The mortgage ‘switching’ market has grown in just a few years from a small group of mortgage lenders offering incentivised switcher rates for existing customers to now most mortgage lenders offering switcher rate deals. The gap between switcher rates and remortgage rates is now generally very small – often switcher rates offering better overall value when when caparing costs over a 5 year deal term.
The table below compares the current switcher rate deals offered by Birmingham Midshires versus Remortgaging to a new lender.
data correct as of 21/08/2022, reference loan is £150,766 Interest Only @ 60% Loan to Value
|Product Category||Product Summary||Monthly Payment||Total to Pay||Diff + / –|
|(total interest payments over intial deal term – 5 Years)||Difference from lowest cost option|
5 Year Fixed
|Fixed @ 3.73% no Fees||£471||£28,304||+ £3,633|
5 Year Fixed
|Fixed @3.23% £999 Bank Fee added to loan||£411||£24,671||+ £0|
|Natwest Remortgage||Fixed @ 3.30% £999 Bank Fee added to loan / Free Valuation / Free Legals||£420||£25,206||+ £535|
The cheapest option when comparing ‘total interest to pay’ over the inital fixed deal term is actually a product switch from Birmingam Midshires with the fees added to loan option. The other consideration to factor in, is that if you are currently on a Birmingham Midshires Term Tracker product, your interest rate is most likely to be 3.75% – 5.99%. Of course this being a tracker product, the rate will increase as the BoE base rate is increased – which is what the current economic outlook points to.
The 5 Year Fixed Rate switcher deal at 3.23% from Birmingham Midshires offers a very competitive deal when not only considering switcher deals, but also competing with the wider remortgage market.
Birmingham Midshires Current Mortgage Products
Existing mortgage customers can access exclusive switcher rate deals on their accounts – Birmingham Midshires no longer publishes these rates as they are individual to the account. You can request a list of deals available to you, complete the short form below and an adviser will come back to you with your mortgage choices. (all our panel advisers are regulated by the Financial Conduct Authority)
** no adviser fees to pay for loans above £50,000
How to Switch Your Rate ?
We work with a panel of mortgage advisers who make the switching process simple and easy, follow the link below to request your product options…
Alternatively if you are looking for the latest purchase and remortgage rates – you can access live realtime Birmingham Midshires mortgage rates using the link below.