Big mortgage lenders reduce rates

At least nine major mortgage lenders announced reduction in fixed rates this week, the biggest weekly fall since the beginning of the year, when the Bank of England cut the bank rate by 0.50% to 1.50%

The reduction of fix rates this week is an indication that the average two year fixed mortgage rate to continue to decline.

The average two year fixed rate fell below 5.00% last week for the first time since June this year, but since then rates have continued to decline, and stand at 4.86% as of today.

The nine lenders who have announced a slash in fixed rates in the last week include: Abbey – selected rates cut by 0.20%; Accord Mortgages – rates cut by 0.40%; Alliance & Leicester – selected rates reduced by up to 0.25%; Cheltenham & Gloucester – selected rates cut by 0.10%; first direct – selected rates reduced by 0.05%; Leeds BS – selected rate reduced by 0.26%; Post Office – rates reduced by up to 1.30%; Scottish Widows Bank – rates reduced by up to 0.40%; and Yorkshire BS – rates reduced by up to 0.30%.

Moneyfacts.co.uk spokesperson Michelle Slade said, “Lenders finally appear to be putting the ‘open for business’ sign back in the window and bringing competition back to the mortgage market. Margins on fixed rate mortgage deals have steadily increased in the last year as lenders looked to repair damaged balance sheets.”

Slade said mortgage rates on the popular two year fixed deals have steadily declined after peaking in October 2009. The current level is at its lowest since August this year.

“The number of two year fixed deals paying below 4.00% has increased by from 53 to 94 in last two months and now accounts for a quarter of all two year fixed deals on the market. Borrowers will be hoping that the early Christmas present they have received from lenders will continue into 2010,” she explained.