Mini Mortgage Price War Breaks Out
It appears a mini price war has broken out between lenders - good news for consumers. There is even one rate below 5% for two years, but watch out for the fees.
For people remortgaging, rather than first-time buyers, there is fresh incentive to take action when their current mortgage deal runs out. The gap between the standard variable rate (the rate they would revert to without action – and it’s generally the highest rate a lender has) and fixed rates has begun to grow again as leading lenders have started to cut their rates.
The gap between the two types of mortgage rate had been falling as fixed rates crept up and SVRs remained fairly static as the Bank of England base rate has remained unchanged for several months. Many in a position to remortgage weren’t bothering as the difference between the two hardly made it worth their while.
Now, for people with large deposits or those with plenty of equity in their property – and many people remortgaging will be in that position – it is definitely worth exploring the opportunities of taking out a decent fixed rate for two or three years.
Some do come with substantial fees (avoided if you simply revert to the SVR), such as Cheltenham & Gloucester’s two-year fixed rate at 5.65%, but with a £2,094 fee. Nevertheless, this rate is much lower than those that were available just two months ago. C&G also has a 5.75% rate for a much reduced fee of £1,094.
Abbey also cut its rates. For those with at least 30% equity in their home, there is a two-year fixed rate of 5.89% with a fee of £995; 25% equity gives them a 5.99% rate with the same fee.
For consumers the good is that there appears to be a mini-price war breaking out between some of the biggest lenders – those two mentioned, plus Halifax, Nationwide and the Woolwich. Smaller lenders are also beginning to follow suit – as they will have to do. Yorkshire building society now has a 5.54% rate for a fee of £895 for those with 25% equity or deposit. Also, for a fee of 2.5% of the loan, Yorkshire has a very enticing 4.89% rate for two years. Because of the percentage style of fee this would suit those with a low mortgage – say, less than £75,000 (fee would be £1,500).
The game is definitely on. Can the housing market pick up as a result?
