The Daily Telegraph

Mortgage price war cuts annual cost to borrowers by £1,800

- By Rachel Mortimer and Eir Nolsøe

AN ESCALATING price war has knocked almost £1,800 off the cost of a typical mortgage in less than three months.

The average two-year fixed rate has fallen from a high of 6.65pc in midnovembe­r to 5.46pc today, according to analyst Moneyfacts.

A typical borrower with a £150,000 loan who postponed locking in a rate will have saved almost £150 in monthly interest, equating to an annual saving of £1,788. Likewise, the average five-year fixed rate has fallen from 6.51pc to 5.22pc in the same period – a drop of 1.29 percentage points. A borrower who took out a £200,000 mortgage on a five-year fixed deal today, instead of November, would save £214 a month, or £2,568 a year, in interest.

David Hollingwor­th, of broker L&C Mortgages, said further rate reductions were on the horizon.

Analysts and brokers anticipate borrowing costs to fall further, despite expectatio­ns that the Bank of England will make its 10th consecutiv­e increase to the Bank Rate tomorrow.

Meanwhile new figures show that banks approved only half of the number of mortgages in December compared with a year earlier. Lenders approved 35,612 home loans at the end of last year, nearly a quarter down from November.

Meanwhile, the number of home loan renewals fell to 26,141 in December from 32,588 the previous month.

However, the figures exclude people remortgagi­ng with their current bank.

The falling number suggests that “the proportion of borrowers staying with their existing lender has shot up”, according to Samuel Tombs of Pantheon Macroecono­mics. He said that implies borrowers may have been anxious about tightening lending criteria.

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