UK lenders start cutting mortgage rates
A number of UK lenders have cut their mortgage rates for certain products and are also pledging to help struggling first time buyers get on the property ladder.
Michael Ossei, personal finance expert at uSwitch.com, said that even although the Bank of England base rate has been at 0.5% for almost three and a half years, consumers generally haven't been getting a fair deal from lenders.
‘It's only now that mortgages are starting to reflect this low rate, with the cheapest average interest rate on a fixed mortgage now around 3%. With many consumers struggling to pay off other debts and with many having seen little or no pay rises over the past few years, it's hardly surprising there is a great deal of appetite for longer term fixed rate deals,’ he explained.
He pointed out that the recent launch of the lowest ever five year fixed rate deal from HSBC, and Santander's competitive five year fixed deal for those wanting to remortgage, suggests that lenders are starting to wise up to what borrowers are looking for and are finally giving them what they want.
‘It's in this market that the battle for customers is really starting to kick off with Barclays, Halifax and Nationwide all reducing their fixed rate mortgages in the last few days. However, there is a down-side. As lenders battle it out for the best long term fixed deals, the number of good value shorter fixed deals, such as two year products with free additional services, has fallen,’ Ossei pointed out.
In 2008, 53% of all two year fixed deals had free valuations and legal fees but in 2012 this has fallen to 47% and he predicts that this downward trend looks set to continue.
‘The other worry for borrowers is the larger deposits now required to benefit from the best rates. The better long term fixed deals now require a 40% deposit on average. Very few are available to buyers with smaller deposits and these tend to come with a trade-off, such as an increase in up-front fees,’ he explained.
‘What we need to see is more lenders starting to compete on fees and deposits as well as rates, allowing those who want to budget and protect themselves from future rates rises to do so without being too heavily penalised,’ he added.
The latest figures from the Building Societies Association show that mortgage approvals by mutuals were up 45% in the first six months of the year compared to the same period in 2011. In June, approvals were up by 35% compared to the same month last year and were 20% higher than the average over the previous six months.
Lloyds Banking Group has confirmed it will lend £5 billion to first time buyers by the end of 2012 and said this will help over 50,000 people buy their first home.
It has also announced a maximum loan to value ratio of 90% on Halifax and Lloyds TSB core product ranges, including on selected new build properties with Halifax and lending to borrowers with a 5% deposit through the Lloyds TSB Lend a Hand and Local Lend a Hand schemes.
‘This commitment is not about paying lip service. It shows that we're providing genuine solutions for people buying their first home. It's important that we dispel some of the myths about first time buyer mortgages. People can buy a home with a 10% deposit, or even 5% through the NewBuy scheme,’ said Stephen Noakes, mortgage director at Lloyds Banking Group.
‘Getting things right at the bottom of the ladder has an important knock on effect throughout the chain. With our unrivalled commitment to affordable housing and new build through Halifax, and innovative products such as Lloyds TSB's Lend a Hand, we're not targeting our support at a select few, but making home ownership a reality for a whole generation of buyers,’ he added.
Halifax and Lloyds TSB last week refreshed their product ranges, reducing product rates including NewBuy and new build by up to 0.20%. From Friday, first time buyers with a 10% deposit can also benefit from £1,000 cashback in Halifax branches.
Barclays has announced it is lowering six of its fixed rates mortgages by up to 0.30% and introducing a market leading package for two years at 3.29% with no application fee for consumers buying a house at 70% LTV.
‘We have decided to introduce a market leading package for customers purchasing a house to help lower the upfront costs and get a really competitive rate. We have recently seen an improvement in the SWAP rates and so we've taken the opportunity to pass these benefits onto customers by reducing some of our more popular fixed rates to give them some great deals including a five year rate below 4%, the lowest we've offered this year,’ said Andy Gray, head of mortgages at Barclays.
First Direct has cut the rates on all of its standard and fee free mortgage range. ‘We are renowned for providing market leading customer service and we're happy to help borrowers looking for a better deal by cutting our mortgage rates at a time when other household bills are rising,’ said Ian Bartholomew, senior mortgage product manager at First Direct.
Leeds Building Society has reduced the rate on its Two Year fixed rate buy to let mortgage by 0.36% to a new market leading rate of 3.99%. This offer has no higher lending charge and allows 10% capital repayments each year without penalty.
‘We believe it's a very good time to lock into a low fixed rate, and have reduced the rate by 0.36% on the two year buy to let deal to a new market leading rate of 3.99% available up to 65% LTV. This flat fee product will attract professional landlords, who may wish to move onto a market leading rate and fix their monthly commitments,’ said Kim Rebecchi, Leeds Building Society sales and marketing director.
