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New rules make mortgages cheaper

03 October 2005
UK mortgage holders are set to become winners under a new set of rules which make mortgages cheaper and credit card interest lower.

The European Union finally agreed on the news rule, known as Base II, this week after much deliberation.

Implementation of the new regulation, to be active by 2007, will stem credit risk, reducing the amount banks must set aside as provision for mortgages, releasing an additional £370 billion for lending.

Head of European bank coverage for Fitch rating agency, Ian Linnell, told Reuters: "Under Basel II the residential mortgages sector is a real winner, and the main beneficiary will be the consumer."

He said that under new rules, there would be intensified competition in the mortgage lending sector.

Financial analysts have also predicted that banks will be competing for more affluent cardholders, which may mean that platinum cardholders enjoy lower rates.

Figures from the Bank of England this week revealed that mortgage lending has finally picked up after a visible slump.

Overall total lending reached £8.9 billion last week.

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