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Abbey reduces rates in slow mortgage market
Abbey yesterday became the latest lender to announce it was cutting its mortgage rates in a further sign that competition is returning to the market.
The group shaved 0.2 off its two-year fixed rate deal for people borrowing 70 per cent of their home's value and 0.1 per cent off its three-year fixed rate loan.
The move will leave rates on both deals at 5.69 per cent for people who pay a 995 arrangement fee.
The lender also announced that it was launching a new range of low-fee deals on Monday for homeowners with a 40 per cent deposit who are borrowings up to 250,000.
People taking out a two-year fixed rate mortgage from the range will pay a rate of 5.79 per cent, while two-year tracker deals start at 5.94 per cent, both with a 499 fee.
Abbey's announcement came after Alliance & Leicester said earlier in the week it was cutting the cost of all but one of its mortgage products, reducing rates by between 0.1 per cent and 0.55 per cent.
A&L, which last month accepted a cash and shares offer worth 1.3bn from Spain's Banco Santander, said the rate on two-year fixed loans of up to 250,000 would fall to 6.19 per cent from 6.64 per cent.
The rate for two-year loans of between 250,000 and 1m drops to 5.99 per cent from 6.14 per cent. A&L is also cutting the rate on three-year loans of up to 1m to 6.89 per cent from 7.09 per cent.
Several UK mortgage lenders have trimmed their mortgage rates in the past two months in response to a decline in the cost of interest rate swaps, used by banks to price fixed-rate mortgages. However, mortgage costs remain high, having risen sharply as banks stung by the credit crunch seek to conserve capital and protect profits.
The abrupt rise in borrowing costs has slashed overall mortgage lending, with total UK mortgage approvals falling to 22,448 in July, a decrease of 65 percent compared with the same period last year, according to figures published by the British Bankers' Association on Tuesday.
According to financial services data group Moneyfacts, the average rate on popular two-year fixed rate loans stands at 6.9 percent, up from 6.56 per cent a year ago, while the rate on three-year deals has risen to 7.13 percent from 6.54 per cent.
Arrangement fees on deals remain higher than last year, while lenders are demanding large deposits in order to secure their best rates.
The average mortgage arrangement fee is now 964, up from 803 in August 2007, while lenders will now advance an average of 80 per cent of a property's value, compared with 90 per cent 12 months earlier.
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Wednesday 23 May 2012
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