Mortgage rate cuts spark hope for borrowers

29 August 2008 / by Rebecca Sargent
Mortgage rates continue to fall, boosting confidence in lenders to opt for fixed or tracker rate mortgages, Yorkshire Building Society has revealed.

Over the last few weeks, mortgage rates have been falling, despite the UK's gloomy economic outlook, and, according to Yorkshire Building Society, the rate cuts are prompting borrowers to be more adventurous with their choice of mortgage.

According to its research, for large parts of 2008, those forced to remortgage have been opting for standard variable rates (SVR) because tracker and fixed rate mortgages became too expensive.

However, as mortgage rates on fixed and variable deals from a number of lenders fall below six per cent, Brits are more likely to apply for the riskier deals. In fact, since Yorkshire Building Society reduced rates on its fixed rate mortgage range by as much as 0.55 per cent, applications have doubled.

Mortgage product manager at Yorkshire BS, Tom Girling, said: "We are pleased to have seen application levels pick up. It is clear that our recent launch of a 5.54 per cent 2 year fixed rate with a £895 fee has triggered a swift uplift of applications. Now that there is clear water between typical SVR's of over 7 per cent and the best 2 year fixes it has focused borrowers' attention on getting their monthly costs down."

It is not just Yorkshire Building Society that is slashing its rates below 6 per cent, the Woolwich has today announced cuts of as much as 0.28 per cent, claiming that a reduction in inter-bank lending (SWAP) rates is allowing it to pass on the cuts to borrowers.

Rates on a Woolwich three year fixed rate mortgage are now as low as 5.69 per cent. Loan to Value (LTV) amounts are also on the up as Britannia offers a rate of 6.19 per cent on a 90 per cent LTV two year fixed rate mortgage.

Finally, Abbey is recognising the need for reduced arrangement fees with its new range of low rate mortgage products, all with a fee of just £499. Head of mortgages at Abbey, Phill Cliff, said: "Abbey is committed to offering a choice of mortgages so our customers can choose the most suitable deal for their needs.

"The new low fee options coming into the range on Monday suit people remortgaging. They will be great for people who have plenty of equity in their property and want a really competitive deal, whilst looking to keep remortgage costs to a minimum."

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