Daily Mail

MORTGAGE RATES HIT RECORD LOW

As another lender slashes loan costs, will we see 0.5% deals?

- By Paul Thomas Money Mail Reporter

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

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 considerin­g 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-tolet 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.

Banks and building societies have also been helped by falling funding costs as City traders believe there is now less of a chance the Bank of England will raise interest rates soon.

The average borrower is already paying £276 a year less than they were 12 months ago, according to figures from 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 at the moment.’

He added: ‘Nearly all of them are behind on their lending targets and so they think they will attract more borrowers by slashing their rates. This is going to continue for the foreseeabl­e future.’

The cheapest two-year fixedrate 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. Although not as cheap as Yorkshire, it will offer a competitiv­e 1.19 per cent two-year fixed rate for borrowers with a 40 per cent deposit. This will cost borrowers just £578 a month on a £150,000 mortgage.

Santander will also offer a competitiv­e 1.84 per cent five-year fixed rate for borrowers with at least a 40 per cent deposit. This will make it one of the cheapest deals on the market over this length of time, costing just £624 a month on a £150,000 mortgage.

HSBC and Santander have both offered 0.99 per cent fixed rates in the past few months, although these have been withdrawn. Last week, smaller name Atom Bank offered a record low 1.29 per cent five-year fixed rate. However, it pulled the deal after eight days due to high demand.

But while rates are dropping, brokers warn that few borrowers qualify for the best deals.

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

‘Lenders are all fighting for the same group of borrowers so it would be good for a few of them to sharpen their rates for first- time buyers with much smaller deposits.’

‘Fantastic rates on offer’

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