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HSBC raised its best-buy tracker mortgage rate yesterday amid expectations that other lenders will follow suit after tomorrow's much-anticipated cut to interest rates.
The decision by HSBC to lift its tracker rate to 3.95% from 3.64% - widening its profit margin against the 2% base rate - followed heavy demand for the product in a mortgage market bereft of competition.
But mortgage brokers predicted that other lenders would use tomorrow's announcement by the monetary policy committee as an excuse to widen their tracker rates.
The MPC is expected to sanction a cut in interest rates to 1.5% or even 1% - the lowest level set by the Bank of England in its 315-year history.
Ray Boulger, senior technical manager at broker John Charcol, said lenders had typically raised the margins on their tracker following each of the recent cuts to official rates. In the past such moves had been justified by saying the price lenders were paying to borrow money in the financial markets was higher than base rates.
But he noted that the closely watched spread between the price banks charge each other and the base rate had narrowed to its lowest level since Bear Stearns collapsed in March.
HSBC expects the MPC to sanction a cut to 1% tomorrow and said its tracker rate would immediately drop by the same amount as it had not put any restrictions on the product.
Boulger pointed out that even with the rise in the tracker rate from 164 basis points above base rate to 195, HSBC still had one of the most competitive products on the market. Its closest competitor is its own subsidiary, First Direct, which is expected to shift its tracker rates too.
HBSC, which is not traditionally a big mortgage player, has pledged to put £15bn into the market this year as part of a package of measures designed to appease the government, which is keen to get the housing market moving. It is the only bank not to raise capital during the banking crisis and is in effect lending twice as much as in 2007 - a record year for the mortgage market.
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