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Leeds states Maradona effect may help tracker mortgages

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Leeds Building Society has stated that tracker mortgages share some traits with Argentinean football legend Maradona.

Controlling expectations � the 'Maradona effect' � is key to the success of tracker mortgages, claims Karen Wint, head of marketing and public relations at Leeds.

Ms Wint cites Mervyn King, the governor of the Bank of England, who likens expectations in the property market to England's defenders in the 1986 World Cup, who expected the striker to turn, when in reality he ran in a straight line.

Property prices may rise and fall due to expectations of interest rate hikes and dips, whereas tracker mortgages continue based on the bank's base rate.

If the Bank of England suggests that interest rates may have to rise to bring the economy off the boil, market expectations will increase swap rates, forcing lenders to increase their fixed rates and result in the consumer paying more for their mortgage, said Ms Wint.

As a consequence, the end result is achieved by controlling expectation and without any real change in path, just as it was by Maradona in 1986.

The market does however expect the next Bank of England base rate change to be an increase and the 'Maradona effect' can work in favour of tracker mortgages.

Leeds has also launched a new tracker mortgage, at 0.25 per cent above the Bank of England base rate, with fee help for customers.

Louise Cuming, an expert at Moneysupermarket, recently stated that tracker mortgages offer good value in the long-term to UK buyers.

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