Mortgage rates hit a record low... and could fall further

A NEW mortgage price war will slash rates to ‘ludicrously low’ levels and cut repayments by hundreds of pounds a year, experts have said.

One of Britain’s biggest banks is chopping the rates on eight of its top deals by up to 0.3 percentage points – a huge cut as loans are already at historic lows.

Experts say lenders are so desperate for business that rates could fall to as low as 0.5 per cent.

Santander, the country’s third-biggest mortgage lender, will reveal its new rates on Tuesday, the Mail understands. The move comes less than a week after Yorkshire Building Society slashed one of its two-year deals to a record low of 0.89 per cent.

Santander’s cuts are expected to trigger an all-out price war, and deals will be slashed over the next fortnight as the big names fight for business.

At the heart of the rate cuts is a Government tax raid on the buy-to-let industry and a City watchdog crackdown which has made it harder for landlords to apply for loans.

The number of landlords applying for mortgages has dropped by 44 per cent in a year, according to the Council of Mortgage Lenders.

Experts say lenders are compensating for the loss of buy-to-let business by slashing their rates for homeowners.

The average borrower is already paying £276 a year less than they were 12 months ago, according to Moneyfacts, the financial data firm.

Martin Stewart, of mortgage brokers London Money, said: ‘Lenders are fighting fiercely to get more customers on to their books and that’s why they are offering these ludicrously low mortgages.’

The cheapest two-year fixed-rate deal available to homeowners is a 0.99 per cent offer from Yorkshire Building Society.

The Mail revealed yesterday that the same lender was launching a variable deal at 0.89 per cent, smashing the record for a new home loan. Shortly afterwards Cumberland Building Society announced it would cut its mortgages by 0.05 percentage points, with offers starting from 1.23 per cent, and now the Mail understands that from Tuesday, Santander will cut many of its top loans by 0.3 percentage points.

But Stuart Gregory, of brokers Lentune Mortgage Consultancy, said: ‘There are some fantastic rates on offer – but the problem some borrowers may find is that they you can’t get them unless they’ve got a big deposit.’