by Mark Johnston
The mortgage war is now on!
It seems that the battle betweenUKlenders to offer the cheapest mortgage rates has started again.
Even though the Bank of England base rate has remained at an all time low of 0.5% for over 3 years now, consumers in general have not been getting a fair deal from lenders.
Prompted by lower bank borrowing costs and the governments new ‘funding for lending’ scheme there has been a noticeable increase in the number of providers who are slashing their rates across their ranges.
“The mortgage rate war has started and looks set to rage on for the next few months”, according to Mark Harris, chief executive of mortgage broker SPF Private Clients.
Therefore competition in the mortgage market is reaching its boiling point. Since the scheme was launched last month, banks have slashed rates across 205 deals, including 39 variable deals and 166 fixed rate offers.
Mortgage commentator, Melanie Bien, has suggested “banks are incentivised to increase their lending with cheaper rates”.
HSBC started the ball rolling in mid July with a 5 year fixed rate mortgage at 2.99%.Santander immediately matched it, both deals come with a high fee of just under £1,500 and lending criteria is strict in both cases.
Natwest then went one better and offered a 5 year fixed deal at a rate of just 2.95% however it carries a huge £2,495 fee.
Even Tesco has dived in to the increasingly crowded market launching a 2 year fixed rate mortgage at 3.99% with an £800 fee.
Barclays, Nationwide, First Direct andLeeds building society have also joined in the battle, cutting the rates on their fixed and tracker rate mortgages by up to 0.5 percentage points.
David Hollingworth, of London and Country, suggested that “the new deals provide home owners with more choice in what remains a tight market”.
In most cases, according to financial data firm moneyfacts, the new deals are only available to those borrowers with large deposits of 20% and above.
Ben Thompson, managing director of Legal & General Mortgage Club, said “some lenders are simply falling over themselves to court the best so called lowest risk borrowers”.
So yet again first time buyers are still being locked out of the best mortgage deals as lenders slash their deals for those with large deposits.
Ray Boulger, of John Charcol, the independent mortgage advisor, advises first time buyers to wait: “for those needing higher loan to value ratio’s there is merit in waiting until the market settles down, when better value will be available”.
Experts believe that while the current deals are not appropriate for many due to high fees and deposits, they do represent a shift towards lower rates and eventually the wider mortgage market could see better offers.
In conclusion, while these deals are a step in the right direction what is really needed is more lenders to start competing on fees and deposits as well as rates.
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