Cheap­est-ever deals as lenders slash rates in a des­per­ate scram­ble for new busi­ness

Scottish Daily Mail - - Front Page - By Matt Oliver and Ben Wilkin­son

MORT­GAGES have hit record low rates in a ‘cut-throat’ price war.

With the elec­tion and Brexit un­cer­tainty giv­ing buy­ers cold feet, banks are of­fer­ing steep dis­counts to pull in cus­tomers.

Bro­kers said fixed rates on fiveyear deals have fallen be­low 1.5 per cent for the first time. Lenders have also slashed rates for two-year mort­gages to as lit­tle as 1.05 per cent.

ex­perts pre­dict they could soon cut these to less than 1 per cent.

The ex­tra­or­di­nary price war has in­ten­si­fied as banks strug­gle to at­tract cus­tomers. They are able to lend so cheaply be­cause they can bor­row money for his­tor­i­cally low costs, with the Bank of eng­land’s base rate set at only 0.75 per cent.

Mort­gage ap­provals for the first half of 2019 were at a decade high, and the num­ber of first-time buy­ers has reached its high­est level since

2007, at 170,000. Mark Har­ris, of mort­gage bro­ker SPF Pri­vate Clients, said the ‘as­ton­ish­ingly cheap’ rates were the low­est he had seen in his 25-year ca­reer.

‘I have never known it to be so com­pet­i­tive. It is cut-throat – just ridicu­lous,’ he added.

‘For a bor­rower to fix your rate for five years at 1.5 per cent, on the face of it, is a very at­trac­tive op­por­tu­nity.’

Fixed-rate mort­gages guar­an­tee that bor­row­ers pay the same in­ter­est on a loan for an agreed pe­riod of time.

Bor­row­ers can al­ter­na­tively choose one that varies, known as a stan­dard vari­able rate, which is based on the Bank of Eng­land’s base rate. A fixed rate can help pro­tect fam­i­lies from sud­den rises in the Bank’s rate that would oth­er­wise push up their monthly pay­ments. The best deals are avail­able only to those who re­quire loans worth up to 60 per cent of the value of their home.

But fam­i­lies can cur­rently se­cure rates of just 2.59 per cent even on loans of 95 per cent of a home’s value – an­other record low.

That is much cheaper than the cur­rent av­er­age stan­dard vari­able rate of 4.9 per cent.

On a £300,000 mort­gage over 25 years, the dif­fer­ence be­tween pay­ing 4.9 per cent and 1.44 per cent amounts to more than £32,000 over five years, ac­cord­ing to Money­facts.

Jane King, a mort­gage ad­viser at Ash Ridge, said the mar­ket was so com­pet­i­tive that she ex­pected banks could cut in­ter­est rates even fur­ther. How­ever, she warned buy­ers to look care­fully at the fees be­ing charged. ‘The fees are where the banks will be mak­ing their money now,’ she added. ‘For buy­ers it is all about af­ford­abil­ity.

‘So it looks like banks will keep cut­ting rates – and who knows how low they will go.’ Three lenders – Hal­i­fax, San­tander and Vir­gin Money – are of­fer­ing five-year fixed mort­gage rates at be­low 1.5 per cent, ac­cord­ing to Money­facts.

This breaches a pre­vi­ous low reached in Oc­to­ber 2017. Hal­i­fax is of­fer­ing the cheap­est rate, at 1.44 per cent. But this comes with a one-off fee of £1,495.

Rachel Springall, a fi­nance ex­pert at Money­facts, said: ‘The mort­gage rate war isn’t over and, as it stands, three big brands of­fer five-year fixed rate mort­gages priced be­low 1.5 per cent.

‘The low­est rate mort­gage may not al­ways of­fer the best over­all value though, as it will de­pend on how much some­one is look­ing to bor­row.

‘As an ex­am­ple, Hal­i­fax has a mar­ket-lead­ing rate of 1.44 per cent but it car­ries a prod­uct fee of £1,495.

‘Bor­row­ers may well be turn­ing to five-year fixed mort­gages to se­cure their monthly re­pay­ments for the longer term dur­ing a pe­riod of eco­nomic un­cer­tainty.

‘Lenders are com­pet­ing on price as it’s a prom­i­nent way to com­pare deals, a move to at­tract not just new cus­tomers, but also to re­tain those who may be look­ing to switch else­where.’

‘It is all about af­ford­abil­ity’

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