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