Drop lock will calm borrowers’ nerves


The cornerstone of any economic recovery is confidence, which is why it’s worrying to see the quarterly consumer confidence survey from the British Retail Consortium showing its first fall since April 2009.

It’s difficult to know the depth of such a survey but when trying to build consumer certainty any negative news can be damaging.

Confidence is also inevitably linked to interest rates. These have been a bone of contention for some time, with speculation persisting about potential rises.

These rumours appeared to have been quashed when Ernst &Young recently suggested that the Bank of England will keep the base rate at 0.5% until 2014, but this is by no means a certainty.

Monetary Policy Committee member Andrew Sentance recently voted to raise the base rate to 0.75% because of inflation not meeting the government’s 2% target.

While this stance has not been adopted by other members of the committee, it may plant a seed of doubt.

To try and bring some peace of mind and confidence to the market we have introduced a drop lock facility for all new tracker and offset borrowers.

This takes the risk out of entering into a low tracker rate by providing the ability to switch to a fixed deal at any point without incurring an early repayment charge. Importantly, we believe this gives borrowers a sense of security when interest rate uncertainly is in the air.