Abbey Mortgage Rates Cut And Raised After ‘bail Out’ Plan Announced
22 April 2008 / by Joy Tibbs
Following the announcement of the Bank of England’s ‘special liquidity scheme’ yesterday, Abbey has decided to slash some of its mortgage rates, while effectively raising others.
The new Bank scheme will allow mortgage lenders to swap risky mortgage-backed assets with Government bonds. The Bank hopes that by pumping £50 billion into the mortgage sector, banks and building societies will be more inclined to lend money to each other, and that this may in turn help to lower mortgage rates for homeowners.
In response to the scheme’s unveiling, Abbey decided to cut its two-year tracker and flexible mortgage rates by 0.1 per cent. An Abbey spokesperson said: “Abbey welcomes and supports the Bank of England’s decision to broaden its range of accepted collateral. It is an important step in bringing greater liquidity to the market,”
“We will continue to review the cost of funding and will look to reflect further changes in our mortgage range going forward. We hope other lenders will also act to support the stimulation of the mortgage market,” they said. By adding another loan-to-value (LTV) band of up to 75 per cent, mortgages will be up to 0.25 per cent cheaper for those with substantial deposits.
However, although Abbey continues to offer 90 per cent and 95 per cent LTV fixed-rate products, it effectively raised prices for these shortly after the measure was announced. Those without adequate deposits will see prices rise rather than fall; borrowers with just five per cent deposits will see rates rise from 5.99 per cent to 6.6 per cent. Its new fixed-rate mortgage deals, launched today, will be 0.34 per cent more expensive on average.
Meanwhile, the bank has withdrawn all but one of its tracker mortgages, leaving one remaining deal with a maximum loan-to-value of 75 per cent at 6.12 per cent and with a £999 fee. It has also increased its two-year fixed rate remortgage solution by 0.61 per cent to 6.14 per cent (including legal and valuation fees), while fees on some of its other fixed-rate mortgages have also risen.
The bank also decided to make its buy-to-let mortgage deals unavailable through brokers, so applicants must apply through Abbey directly. And, although it still offers landlords a two-year fixed-rate mortgage and a two-year tracker deal, other buy-to-let offers are to be withheld altogether for the time being.
©Fair Investment Company Ltd
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