The mortgage market is pretty confusing at the moment, with rates going both up and down. What's going on?

If you like to keep up to date with mortgage rates, you might be feeling a little confused about what's going on in 2012. And who could blame you? The headlines seem to contradict each other on a regular basis.

Take last month for example. First rates were reported as going up, then they were going down.

This week we have had even more of a mixed bag with some lenders chopping the rates on certain deals while increasing them on others. It's enough to send anyone into a spin.

Old and new
Firstly, it's important to understand the difference between what's happening to old and new rates, because lenders have been tweaking both of them this year.


When it comes to your existing rate you will be safe from increases if you have opted for a fixed deal as these are set in stone for an agreed period (after which you automatically move to your lender's standard variable rate).

If you have a tracker rate, your lender can only increase it in line with an increase in the Bank of England base rate. And this hasn't budged in three years, nor do the experts think it is likely to rise soon.

The existing borrowers who are at risk of rises are those on a standard variable rate (SVR), or any rate linked to an SVR (like a discounted variable or a capped rate).

A handful of lenders have already increased their SVRs in 2012, affecting well over a million borrowers. These include Halifax, Bank of Ireland, Clydesdale and Yorkshire Banks and RBS/NatWest on their offset and current account mortgages.

If you have been directly impacted by these SVR increases you are probably already on the lookout for a new mortgage deal. But even if not, the recent hikes highlight the vulnerability of being on a rate that can be changed at your lender's discretion.

A new deal
If you are looking for a new mortgage, either because you are a first-time buyer, a remortgagor or a home mover, each lender offers a range of new mortgage products for you to choose from.

And it is the rates on these deals that have been moving up and down over the last few months.

So what is actually happening?
New mortgage rates are often tweaked but there has been a gradual increase in mortgage rates since the start of this year.

This became headline news in May when a raft of lenders pulled their ranges and relaunched new deals at higher rates of interest, blaming the increased costs of funding.

The lenders to hike rates included Yorkshire Building Society, First Direct, Santander, ING Direct, Norwich & Peterborough Building Society, and Halifax.

Just when it was becoming clear that new mortgage deals were getting more and more expensive, Nationwide and Abbey for Intermediaries completely bucked the trend by cutting rates on some of their mortgage products.

They were followed at the end of May by other lenders, including Woolwich which chopped its fixed rates and Virgin Money which slashed new mortgage rates by up to 0.20%. And then Nationwide cut some of its rates again.

Mortgages temporarily looked like they were getting cheaper, but now the waters have been muddied again.

We have seen a mixed bag so far in June. Accord Mortgages is cutting rates on its mortgages up to 75% loan to value while increasing rates for those with just a 15% deposit.

Yorkshire Building Society has announced it will chop its 90% mortgages for those with a small deposit.

And Clydesdale and Yorkshire Bank are waiving their mortgage arrangement fees (usually £999) until mid-July – not quite a rate cut, but it certainly saves you money.

Why the chopping and changing?
Lenders reprice their deals for all sorts of reasons, including changes to their costs of funding, their costs of operating and the profit they want to make.

They also change their mortgage pricing to control their application levels, because they don't want more business than they can handle. In the current market some of the major lenders, including the biggest, Lloyds Banking Group, have admitted they are looking to reduce their market share. As a result all lenders need to strike the right balance on pricing, to make sure they get a good flow of business without being swamped.

It's not just mortgage pricing that is affected – lending criteria is being tightened by stealth to reduce business volumes, with some lenders getting so personal they will even ask what you spend on your partner for their birthday.

What next?
The Bank of England has warned that the eurozone crisis could force UK mortgage rates upwards as it increases the costs of funding homeloans for lenders.

On the flip side Christine Lagarde of the IMF has suggested the Bank of England should actually cut its base rate further to stimulate growth. And swap rates – which affect the price of fixed rate mortgages – fell to a new low last week.

In other words, the volatile world of mortgage pricing reflects the uncertain wider economy, and the competing pressures faced by lenders.

Below are some of the best deals around:

14 top variable deals

LENDER	TYPE OF DEAL	RATE	FEE	MAX LTV
NatWest	Two-year tracker	2.69%	£999	60%
Leeds BS	Two-year discount	2.85%	£999	75%
Post Office	Two-year tracker	2.89%	£995	75%
Cumberland BS	Three-year discount	2.99%	£495	75%
HSBC	Term tracker	2.99%	£599	70%
First Direct	Term tracker	3.29%	£499	65%
HSBC	Term tracker	3.29%	Fee-free	70%
HSBC	Term tracker	3.29%	£599	80%
Norwich & Peterborough BS	Two-year tracker	3.34%	£295	75%
First Direct	Term tracker	3.49%	£499	75%
Post Office	Two-year tracker	3.49%	£995	85%
HSBC	Two-year discount	3.59%	Fee-free	85%
HSBC	Two-year discount	3.84%	Fee-free	90%
HSBC	Term tracker	4.79%	£999	90%

12 fab fixes

LENDER	TYPE OF DEAL	RATE	FEE	MAX LTV
HSBC	Two-year fix	2.64%	£1,999	60%
Cumberland BS	Two-year fix	2.99%	£699	60%
NatWest	Two-year fix	2.99%	£999	60%
Cumberland BS	Two-year fix	3.23%	£699	75%
Leeds BS	Two-year fix	3.39%	£999	75%
Principality BS	Two-year fix	3.79%	£999	85%
Cumberland BS	Five-year fix	3.84%	£299	60%
Cumberland BS	Five-year fix	3.96%	£299	75%
First Direct	Two-year fix	4.19%	£999	90%
Leeds BS	Five-year fix	4.19%	£999	80%
The Coop Bank	Five-year fix	4.39%	£999	85%
HSBC	Five-year fix	4.79%	£999	90%

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