Banks and building societies have embarked on a mortgage price war, offering the lowest five-year fixed-rate loans ever seen in the UK, prompted by lower bank borrowing costs and the government’s new Funding For Lending scheme.
NatWest is the latest provider to cut its rates, offering a five-year fixed-rate mortgage at 2.95%, following the lead of HSBC and Santander’s 2.99% five-year deals. Others have joined in too, with Barclays, Nationwide, First Direct and Leeds building society all cutting the rates on their fixed- and tracker-rate mortgages by up to 0.5 percentage points.
Mortgage rates are plummeting because of falling “swap rates” – the price at which banks and building societies lend to each other, while some providers are slashing rates ahead of an additional boost in funding from the government’s Funding For Lending initiative.
Barclays, Lloyds, RBS and Nationwide are among those taking part in the initiative, where the Treasury and Bank of England provide cheap money to banks for several years, at below market rates, in exchange for the banks lending the money on to home buyers and small- and medium-sized businesses.
“The Funding for Lending scheme is very quickly proving effective as far as the mortgage market is concerned,” explained Ray Boulger of mortgage broker John Charcol. “Not only does the scheme offer most lenders an incentive to increase lending, but it is also a significant factor in the sharp drop in swap and Libor rates.”
However, in most cases, the new deals are only available to borrowers with large deposits, meaning first-time buyers will still struggle to find a loan. Many also come with hefty arrangement fees. Borrowers taking out the HSBC, Santander or NatWest five-year fix will need a 40% deposit to qualify for the deal and must pay a steep booking fee of at least £1,495 to Santander and £2,495 to NatWest.
Royal Bank of Scotland has cut its five-year fixed-rate to 4.79% for those with a 10% deposit, while First Direct has slashed its two-year fixed-rate mortgage for first-time buyers with a 10% deposit to 4.29%. Mark Harris, chief executive of mortgage broker SPF Private Clients, said the cheapest five-year fixed-rate mortgage a buyer with a 5% deposit can borrow will cost 5.99% from the Leeds building society. “On a £150,000 mortgage, this works out at an extra £380 a month, compared to NatWest’s five-year fix. Over the five years , you would pay an extra £22,800 for having a smaller deposit, practically double what the homeowner with the bigger down payment would pay.”
Story from The Guardian Newspaper http://www.guardian.co.uk/money/2012/jul/31/mortgage-price-war-banks-building-societies?newsfeed=true..Writtern by Mark King
If you want to buy a home and want the best rates, Call Michael Usher Mortgage Services Camberley