Nationalised bank Northern Rock has announced that it will be launching a brand new range of mortgage products – a sign that competition could be returning to the mortgage market and credit conditions are easing.
The news comes as other lenders announce rate cuts, and amid reports that the average two year fixed rate mortgage
has fallen in price from the eight year high that it reached in June.
The average rate is now 6.36 per cent, down from 6.6 per cent, according to data from the Bank of England, and Northern Rock's new two year fixed rate mortgage stands at a competitive 5.89 per cent, but is only available to customers who have a 25 per cent deposit.
Industry experts have speculated that the move from Northern Rock is an attempt to improve the quality of its mortgage
book, appealing to customers that can afford a larger deposit and are therefore less likely to default on payments or to go into negative equity as house prices fall.
The lender has said that it is largely succeeding in deterring existing customers from remortgaging and pushing them onto other lenders as it repays its loan to the Bank of England, but it is also reportedly making life difficult for those customers who cannot find an affordable mortgage deal elsewhere.
Leeds Building Society has also launched a competitive deal, offering a fee-free three year fixed rate mortgage
on a 90 per cent LTV loan, with rates starting from 6.99 per cent. The mortgage charges no fee for valuation, legal services for remortgages, or higher lending charge.
Other lenders are also starting to compete for new business, cutting their rates and fees. Abbey has cut rates on its five year fixed rate deals by 0.3 per cent, and reduced the fees on its two and three year fixed rates.
While this could all be construed as an easing in the credit crunched market, some analysts believe it is simply a reflection of swap rates having dropped, which determine the price lenders pay for credit and has a knock on effect on what they charge their customers.
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