Abbey And Nationwide Provide Some Respite
Abbey and Nationwide were able to cut some mortgage rates last week, but it is not expected to be part of a downward trend
There was just a glimmer of hope for homeowners at the end of last week as two major lenders cut their mortgage interest rates.
Nationwide Building Society and Abbey cut the costs of some of their home loans, which came as a welcome surprise in among the continuing bad news of falling house prices, failing estate agents and mostly rising mortgage costs.
However, the cuts were quickly followed by a warning that they may only prove temporary, with the lenders making use of a low swap rate which may not last long. It would, experts said, be rash to interpret these cuts as the beginning of a turnaround in the mortgage market. Swap rates have gone back up again, and that could mean further increases to mortgage rates across the board.
The number of mortgage products available to borrowers continues to shrink. There are now just 3,846 products on the market, compared with over 15,000 just ten months ago, when the credit crunch first started to bite.
Many fixed-rate mortgages now cost £300 a month more than they did two years ago, and people looking to take out new mortgage deals are looking at the highest fixed-rate deals for ten years. Two years ago it was possible to find a fixed-rate deal for 4.34%, but now the average rate is 6.64% for a two-year fixed loan. For those with a £150,000 mortgage average payments would rise by £206 a month to £1,026. Anyone with a mortgage of £250,000 will now have an average monthly repayment of £1,710 – up by £343 from two years ago.
Those on five year fixed deals from 2003 will fare even worse, and on a £250,000 mortgage could face monthly repayments of over £500 more.
Around 1.4 million homeowners are facing the end of fixed rate deals this year, and will face the worst set of interest rates for over ten years. First-time buyers are finding it tougher than ever, despite falling house prices. They are now expected to find larger deposits before they can get any kind of a mortgage.
