Lenders cut mortgage rates

4 July 2008

Three of Britain’s biggest mortgage lenders have cut interest rates on selected mortgage deals.

Halifax is cutting the cost of its tracker mortgages for existing customers by an average of 0.12%, while Nationwide will next week cut the price of some of its fixed-rate and tracker mortgage deals by up to 0.27%. Abbey is today (Friday 4 July) reducing rates on some of its fixed and tracker mortgage deals by up to 0.20%.

Abbey’s rate cuts, which only apply for borrowers able to put down a deposit of at least 25%, include a 0.14% price cut on two-year fixed deals to 6.44% and a 0.2% reduction on two-year trackers to 6.04%.

A spokesman for the bank says: "Abbey's strength in the mortgage market allows us to continue to offer competitive deals."

Despite cutting its tracker deals, Halifax is also increasing the cost of its fixed rates by 0.23%.

The cuts come about a month after the majority of lenders implemented mortgage rate rises, in response to the rising cost of funding. In June the cost of funding for fixed-rate mortgages (known as swap rates) rose to over 6%.

At the time Abbey increased prices on its five-year fixed rate range by between 0.07% and 0.26%, and upped rates on two and three-year fixed products by between 0.15% and 0.56%.

Libor, which is used to price tracker rate mortgages, is currently sitting at the 5.9% mark although swap rates remain above 6%. However, they have started to fall slightly. 

David Hollingworth, mortgage specialist at London & Country, says that if Libor and swap rates continue to fall, then more mortgage lenders could start to reduce rates. 

But he adds: "Libor and swaps are very volatile so nothing is certain. These lenders putting down rates could be a response to cheaper funding, or it could just be that they have more appetite to lend and want to be more competitive."

Hollingworth adds that the cuts position Abbey and Nationwide as offering some of the most competitive trackers on the market.   

Abbey now offers a two-year tracker deal through mortgage brokers at 5.69% with a fee of £1,999 up to 60% of the property, or 5.79% up to 75%. Nationwide, meanwhile, has a two-year tracker at 5.78% with a £1,499 up to 75%.   

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