First Direct Back In The Market
Nationwide Building Society and Abbey have both cut some mortgage rates recently. Now First Direct has come back to the mortgage market. These are both bits of good news, but mortgage rates sit much higher above the base rate than they did two years ago.
Following cuts in mortgage rates by Nationwide Building Society and Abbey last week, there is further good news in the mortgage market.
First Direct, owned by HSBC, is returning to the mortgage market after having pulled out at the beginning of April, when it received five times more than its normal level of applications. With those now cleared, it is offering loans again, with an interest rate for a two-year fixed at 5.76%, with up to 80% loan-to-value and a fee of £499.
Nationwide Building Society cut up to 0.3% off its fixed rate mortgages, and Abbey cut fixed rates by up to 0.17% and shaved 0.05% of its tracker rates.
The less good news is that lenders are only offering the best mortgage rates to those with deposits of 20 to 25%, and then there are usually hefty fees attached.
It is hoped that the moves by Nationwide and Abbey, together with First Direct’s re-entry, will at last spell some good news for beleaguered mortgage holders.
However, these glimmers of light cannot be taken as a sign that the mortgage market is going to return to its pre-credit crunch state – it will not. The average rate for a two-year fixed rate deal across the top lenders actually went up by 0.03% last week, to 6.26%.
There was better news across the three-year fixed range, with the average rate falling by 0.1% to 6.13%, and the average tracker rate fell by 0.05% to 6.21%.
These should also be seen in the wider context for the current state of the market. Two years ago the best deals were very close the Bank of England base rate of 4.5%; now they are much higher than the Bank base rate of 5%.
Sadly, not all lenders are passing on much, if any, of the base rate cuts on to borrowers. The base rate was cut to 5% five weeks ago, and 24 lenders (about 25% of the market) have still not reduced their standard variable rates.
