A number of UK lenders have cut their mortgage rates for certain products and are also pledging to help struggling first time buyers get on the property ladder.
Michael Ossei, personal finance expert at uSwitch.com, said that even although the Bank of England base rate has been at 0.5% for almost three and a half years, consumers generally haven't been getting a fair deal from lenders.
‘It's only now that mortgages are starting to reflect this low rate, with the cheapest average interest rate on a fixed mortgage now around 3%. With many consumers struggling to pay off other debts and with many having seen little or no pay rises over the past few years, it's hardly surprising there is a great deal of appetite for longer term fixed rate deals,’ he explained.
He pointed out that the recent launch of the lowest ever five year fixed rate deal from HSBC, and Santander's competitive five year fixed deal for those wanting to remortgage, suggests that lenders are starting to wise up to what borrowers are looking for and are finally giving them what they want.
‘It's in this market that the battle for customers is really starting to kick off with Barclays, Halifax and Nationwide all reducing their fixed rate mortgages in the last few days. However, there is a down-side. As lenders battle it out for the best long term fixed deals, the number of good value shorter fixed deals, such as two year products with free additional services, has fallen,’ Ossei pointed out.
In 2008, 53% of all two year fixed deals had free valuations and legal fees but in 2012 this has fallen to 47% and he predicts that this downward trend looks set to continue.
‘The other worry for borrowers is the larger deposits now required to benefit from the best rates. The better long term fixed deals now require a 40% deposit on average. Very few are available to buyers with smaller deposits and these tend to come with a trade-off, such as an increase in up-front fees,’ he explained.
‘What we need to see is more lenders starting to compete on fees and deposits as well as rates, allowing those who want to budget and protect themselves from future rates rises to do so without being too heavily penalised,’ he added.
The latest figures from the Building Societies Association show that mortgage approvals by mutuals were up 45% in the first six months of the year compared to the same period in 2011. In June, approvals were up by 35% compared to the same month last year and were 20% higher than the average over the previous six months.
Lloyds Banking Group has confirmed it will lend £5 billion to first time buyers by the end of 2012 and said this will help over 50,000 people buy their first home.
It has also announced a maximum loan to value ratio of 90% on Halifax and Lloyds TSB core product...
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