Fixed rates slashed in mortgage lending price war!

Analysts are predicting that the cost of mortgages are set to fall even further as a price war breaks out amongst lenders as they fight to provide the most tempting deals to consumers.

Low interbank lending costs are helping to fuel the price cuts as well as the Bank of England’s Funding for Lending Scheme (FLS).

Unsurprisingly the best deals are reserved for borrowers with plenty of equity but new competitive deals for first-time buyers and homeowners with low amounts of deposit are beginning to emerge.

However, a number of mainstream lenders have cut rates in recent weeks and it looks like others will have to follow if they want to remain competitive.

As such, if you have been enjoying the benefits of a low standard variable rate (SVR) with your current lender and have been trying to judge when is the right time to fix to a competitive deal, then the next few months could provide the best opportunity.

The price war comes at a time when various surveys are providing hope for the UK property market. The Bank of England data shows that the number of mortgage approvals is rising and is now at an 11-month high.

Last week, the Co-operative launched a five-year fixed rate mortgage deal charging just 2.79 per cent for borrowers with a 60 per cent loan-to-value (LTV) ratio with a fee of £999.

The next best deal comes from First Direct at 2.89 per cent but that comes with a fee double that of the Co-op’s at £1,999.

This follows a number of rate reductions in recent weeks by the Nationwide Building Society which has taken its five-year fixed rate mortgage down to 3.09 per cent for existing borrowers and 3.19 per cent for new customers. It is also offering reduced fees on some of its products for first-time buyers.

Leeds Building Society has also been cutting rates. Earlier this week it cut the rate on its two-year fixed rate mortgage for borrowers who have a 25 per cent deposit to just 2.54 per cent. The Leeds also reduced rates on its three-year fixed rate mortgage range by up to 0.31 per cent for borrowers with a 15 or 25 per cent deposit earlier this month.

Earlier this month the Co-op launched a fee-free two-year fixed rate mortgage at just 3.99 per cent for first-time buyers with just a ten per cent deposit.

Ramping up the competition for first-time buyers last week was the Chelsea Building Society who launched a range of fixed rate mortgage deals aimed at first-time buyers with an offset option allowing them to use their savings to pay down their mortgage quicker and potentially save thousands of pounds in interest.

Abbey, the lending arm of Santander is offering a two-year fix at a rate of just 1.99 per cent, though this product is only available for seven days. It means that fixing for two years is cheaper than a tracker deal at 2.49 per cent.

The reduction in mortgage rates has come about because of a fall in the cost of overnight and one-month Libor rates which are now below the Bank of England’s base rate.