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Return Of The Mortgage tricks - The Times

Lenders are resorting to old-fashioned tactics to trap borrowers into potentially poor deals, despite conditions for banks and building societies improving to pre-credit crunch levels last week.

Lenders are pushing “discount” mortgages, which track their own standard variable rates (SVRs) rather than Bank rate, leaving borrowers at their lender’s mercy when interest rates rise or fall.

HSBC, for example, offers the market-leading two-year variable rate at 1.99% for borrowers with a 40% deposit, but the deal is a 1.95 percentage point discount on HSBC’s SVR (currently 3.94%) rather than a tracker linked to Bank rate.

Prior to the credit crunch, brokers always warned against discount mortgages because of the risk that the SVR would move out of line with Bank rate