Self builders urged to check the small print on tracker mortgages

Potential self builders or those who have already secured financing for their projects are warned to look out for a collar.

In the mainstream mortgage market, Ray Boulger, of mortgage advisor John Charcol, claims that out of 3.9 million borrowers with a tracker mortgage, a large number could not see the benefit of a cut because their deal has what is known as a collar.

The collar allows a lender to not pass on cuts below a certain level, such as three per cent.

Mr Boulger estimates that between 500,000 and 600,000 existing homeowners will not see the full benefit of this cut, while some may see no benefit at all and the same could apply to self builders.

"This will be the first time a significant number of borrowers on a tracker mortgage will feel the impact of a collar," he says.

However, self builders can benefit in many other ways as the typical self build home is typically worth up to 30 per cent more on completion than it cost to build.