Mortgage Competition Is On The Way Back
As Alliance & Leicester cut many of its fixed rate mortgages this week, it really does seem like mortgage competition has been re-joined. A&L is owned by Banco Santander which also owns Abbey, and is pushing aggressively into the UK mortgage market.
Alliance & Leicester joined the band of lenders cutting mortgage rates this week, as it cut rates on some of its most popular mortgages. Competition in the mortgage market really does seem to be on the way back.
Last month Alliance & Leicester accepted a £1.3bn takeover offer from Banco Santander of Spain after it had suffered big write-downs on assets associated with the US sub-prime mortgage market, but this week the bank was able to cut mortgage rates by between 0.1% and 0.55% on various products.
Alliance & Leicester have followed the recent trend in which several mortgage lenders in the UK have reduced their mortgage rates recently. They have been able to do this following the decline in the swap rate – the interest rate at which banks borrow money to finance their mortgage lending.
Over the longer term, however, mortgage costs remain high, with associated fees high, and to get the best rates borrowers need to have a large deposit or plenty of equity on the property they already own for remortgaging.
Overall lending has continued to decline, and there were 22,448 mortgage approvals in July, 65% down on the same month in 2007, according to figures from the British Bankers’ Association.
Alliance & Leicester said that their new products were available to new and existing customers. Banco Santander, which also owns Abbey, has been making positive strides into the UK mortgage market in the first half of this year, making it the third largest writer of mortgages in the UK currently.
The new products mean that Alliance & Leicester now offers a rate of 6.19% on two-year fixed loans up to £250,000 – down from the previous rate of 6.64%. For loans of £250,000 to £1m, the two-year fixed rate is now down to 5.99% from 6.14%. A three-year fixed loan in the same high loan bracket is now at 6.89% from 7.09%.
