Mortgage rates start to fall

In a welcome move, a number of mortgage lenders have today announced a reduction in the interest rates which will be charged to new customers. It has been noticeable over past months that whilst the Bank of England had reduced the base rate to a historic low, mortgage rates, and especially fixed rates had not followed, despite the wholesale cost of these having done so.

The first lender to announce the changes was Abbey, who emailed brokers and intermediaries first thing on Thursday morning with notification of rate changes coming into effect today. The Abbey are introducing new market leading three year tracker products with rates starting at 3.99 per cent which will be available for those wishing to borrow up to seventy five per cent of the value of their property. To compliment the new tracker rate, the Abbey are introducing a new two year fixed rate large loan product for those who wish to borrow up to £2.5 million. The rate is set at 4.99 per cent and is available to those who wish to borrow up to sixty per cent of the value of the property. A new ten year fixed rate at 5.24 per cent, and an across the board reduction of 0.25 per cent on fixed rate mortgages under £200,000 complete the other headline changes for Abbey.

The Abbey announcement was followed within hours by an announcement from the Royal Bank of Scotland of reductions in both the house purchase mortgages offered by them, and in the remortgage deals offered by First Active who are part of the group. The changes apply to both two and five year fixed rates from both brands, across all loan to value options. At the lower end of the scale, a purchaser with a forty per cent deposit will enjoy a two year fixed rate of 3.89 per cent, whilst a remortgage applicant with forty percent equity will secure 3.99 per cent from First Active. For those who have just fifteen per cent deposit, the rate is 6.09 per cent for a five year fixed, rising to 6.29 per cent for remortgage applicants.

Both Standard Life Bank a GE Home Lending, who operate under the IGroup and First National brands, announced product changes yesterday afternoon. Whilst there were some alterations to rates, these were overshadowed by the other contents of the announcement. Standard Life Bank have revealed that they will now no longer offer mortgages to those who have a ten per cent deposit, requiring a minimum of fifteen per cent instead. The news is particularly unwelcome as the government continue to encourage lenders to expand lending. GE Home Lending have announced that they will accept a reduced level of bad credit on some of their non-standard range, and have ceased to offer self certification mortgages at all.

The announcements were completed just before midnight when Northern Rock, now tasked by the government to increase lending, announced a couple of new, lower fixed rates. The new rates start at 4.19 per cent for a two year fixed rate and at 4.79 per cent for a five year fixed rate, both of which are available for those borrowing up to sixty five per cent of the house value. Northern Rock offer deals at higher rates for those who have a minimum deposit or equity of fifteen per cent, and will meet the costs of the valuation and legal requirements for remortgage customers.

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