Cost of home loans tumbles to record low
HOMEOWNERS are currently enjoying the cheapest mortgage rates on record, official figures have revealed.
A bid to drum up business has seen a fierce rate war break out between some of Britain’s biggest lenders.
Although the rising cost of groceries and energy has seen inflation rise to its highest level since September 2013, mortgage rates are at rock bottom.
Experts said the collapse of the buy-to-let market after tax hikes on second properties – introduced last April by former chancellor George Osborne – has made lenders increasingly desperate for new business.
The launch of the first sub-1 per cent mortgage deals has helped push the average rate of popular two-year fixed-rate deals to just 1.26 per cent in April, according to figures from the Bank of England, down from 1.73 per cent in July last year.
It means that borrowers with a 40 per cent deposit will see their monthly repayment on a £150,000 mortgage fall from £616.25 to £583.14.
The latest cuts have been fuelled partly by the Government’s measures to curb the buy-to-let market, with a stamp duty surcharge on second homes and rule changes which have made it harder for landlords to apply for loans. Lenders have been compensating for the loss of these customers by slashing rates for homeowners. Interest rates have also been kept at a record low level by the Bank of England.
Last night experts said these figures should act as a wake-up call to millions of borrowers who are lumbered with expensive standard variable rate mortgages, which usually range between 3.75 per cent and almost 6 per cent. At 4.5 per cent, the monthly repayments on a £150,000 mortgage would be £833.75, according to mortgage broker London & Country.
Spokesman David Holling- worth said: ‘This underlines the ongoing rate war that is being waged by lenders at the moment and should act as a stark reminder to homeowners to make sure that they are reviewing their deal to take advantage of the current market conditions.
‘Failing to grab the chance to cut the interest rate on the single biggest outgoing is tantamount to throwing money down the drain.’
Last month a string of major lenders rushed out cheap deals, with Yorkshire Building Society launching the lowest rate on record. Its two-year 0.89 per cent standard variable rate mortgage is available to borrowers with a 35 per cent deposit. It had already launched the cheapest two-year fixed rate mortgage, at 0.99 per cent.
Santander and Nationwide – Britain’s biggest building society – also cut their rates last month.
The average borrower is now paying £276 a year less than they were 12 months ago, according to figures from financial data firm Moneyfacts.
Recent industry figures show that the glut of cheap deals and high moving costs have triggered a surge in the number of homeowners remortgaging their property, although figures published by the Bank of England yesterday showed the number of approvals for both house purchases and remortgaging fell last month – in the latest sign that the property market is slowing.
Rushing out cheap deals