Mortgage rates Reducing despite the Credit Crunch 

5 September, 2008

This article was taken from a specialist broker magazine and is quite telling on waht is happening in the Mortgage Market even though the Bank of England maintained rates at 5% yesterday.

According to research carried out by Moneyfacts, the average two-year fixed rate has dropped to 6.39%. This is roughly around the same level that was seen just before the credit crunch.

Moneyfacts Michelle Slade says that "a good indication of what is going on in the market is the average rate. As the top ten lenders make up over 77% of the market it is interesting to see what they are up to.

All the main lenders have cut their two year fixed rates since the peak of early July 2008, with the exception of Northern Rock which has put up its rate by 0.01%, as well as increasing its arrangement fee by £500. The biggest cut comes from the Halifax where the rate has gone from 7.27% to 5.99%, as of the start of this week. Although Halifax now offers one of the best rates it has a high arrangement fee relative to its competitors.

Bradford & Bingley and Cheltenham and Gloucester have also passed on significant cuts, but this has been offset slightly by an increase in their average fees

Michelle goes on to say that "the cost to lenders in obtaining the funds for mortgages on the money markets has dropped significantly in the last few months and we are now seeing some relief for borrowers who are looking for a new deal. The increase in borrowers monthly repayments should not be as much as it would have been had they remortgaged two months ago, which will hopefully mean more borrowers can afford to remain in their homes.

“I doubt we will see rates being cut to levels similar to when base rate was last at 5%, but we should hopefully see further cuts from the big lenders in the coming months. Only time will tell if we have finally turned a corner, but this is the most prolonged period of cuts we have seen since the credit crunch began.”

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