Lenders slash mortgage rates

7 August 2008
Mortgage lenders have embarked on a fresh round of rate cuts which suggest that competition is slowly returning to the mortgage market.

Both Abbey and Nationwide have cut the price of both fixed and tracker-rate mortgage products, although the best rates are still reserved for those with larger deposits.

Nationwide has cut the rates on some of its two, three and five-year fixed-rate mortgages by up to 0.25%. Its three-year fixed-rate mortgage deal at 75% loan to value has fallen from 6.23% to 5.98%, while its two and three-year tracker rates have also been cut by up to 0.10%.

Abbey has followed on from a previous round of cuts announced last week, reducing its fixed-rates by up to 0.10%. Its two-year tracker mortgage at 75% LTV is now priced at 5.89%, while two and three-year fixed-rate deals start from 6.19%.

Borrowers looking for smaller loans can also benefit from low fees, with Abbey announcing a new fixed-rate deal for loans under £150,000 or less available for a fee of £549.

“There is certainly more competition returning to the mortgage market, although the best rates are still aimed at those with a lower risk profile,” said , spokesperson for broker London & Country. “However with the big lenders jockeying for position this means that more lenders will be forced to follow suit. In fact today’s announcement is simply continuing a trend that we have seen for the past two weeks.”

Earlier this week Halifax cut the cost of 30 of its mortgage products, reducing the interest on one two-year fixed rate product by 0.38%. Its sister company, the Bank of Scotland, cut rates on 36 deals by up to 0.70%.

“But it’s not just big lenders vying for more mortgage business,” added Hollingworth. “Smaller building societies such as Market Harborough and Principality are getting in on the act too, so it’s pleasing to see lenders both big and small begin to start pricing themselves into the market.”

However, in spite of the cuts mortgage rates continue to stand well above the Bank of England's base rate which was kept on hold at 5% for the fourth consecutive month August.

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