Mortgage Rates Start To Come Down
The average fixed rate mortgage among the top five lenders in the UK has fallen in the last few weeks. It may signal the end of the worst of the mortgage crisis. A boost in the mortgage market should help to boost the ailing property market too.
Quietly, but significantly, fixed rate mortgages have been coming down in recent weeks.
Figures from personal finance research house Moneyfacts show that anyone taking out a typical fixed rate mortgage today could be paying around £345 less per year on repayments than if they had taken out a similar mortgage three weeks ago. It could be the first sign that the worst of the mortgage crisis is over.
The average two-year fixed rate mortgage on offer from the top five UK lenders reached a peak of 7.01% on 4 July, but has now dropped back to 6.78%. The figures mean a reduction in repayments of £29 per month on a typical £150,000 home loan.
Among the big lenders to cut rates recently has been Halifax, which cut its rate last week for third time in as many weeks. RBS, Scottish Widows, Northern Rock, Abbey and Cheltenham & Gloucester have all cut their rates in the last couple of week. Halifax now has a three-year fixed rate at 6.24% for borrowers with a 25% deposit.
Some mortgage experts latched onto the good news to suggest that maybe the worst of the upheaval in the mortgage market was over. In the last six months the price of money on the wholesale market has been on the rise thanks to the credit crunch, and this has forced the banks to put up mortgage rates. The Bank of England cut the base rate to 5%, but still mortgages kept on rising. The increasing cost of financing a home deal has bitten into the housing market badly.
However, recently the cost of money between the banks has started to drop, and mortgage rates are coming down as a result.
With the high costs and lack of availability of mortgages being cited as the two main reasons for a lack of activity in the property market, these falling rates could act as the fillip the market needs. That would be good news for buyers and sellers alike, not to mention a boost to the economy.
