Fixed Rate Mortgages Start to Fall
Posted on 28 July 2007 by
After the market turmoil of the last week, with swap rates at last showing meaningful falls on the back of a strong gilt edge market, the flood of increases in the cost of fixed rate mortgages is beginning to abate, although some increases are still coming through. For example Chelsea Building Society has announced that all their fixed rates will be increased on Wednesday 1 August.
However, we are now beginning to see the first shoots of some good news for borrowers looking for a fixed rate mortgage as two lenders, RBS and HBOS Group, have announced cuts in some of their fixed rates, albeit only in the 2 year market so far. However, that is the period about 80% of fixed rate borrowers choose.
On Tuesday 31 July Halifax are reducing by between 0.1% and 0.2% the rates on 3 of their 2 year fixes, although they are also increasing by 0.1% the rate on what is currently their most competitive 2 year fix, only available for product transfers and further advances, from 5.89% to 5.99%. Excluding their expensive 2 year fixes with a percentage based fee their lowest 2 year fixed rate available for purchasers will fall back on Tuesday below the psychologically important 6% threshold to 5.89% and this is being done without increasing the arrangement fee, although to get this rate the fee is already high at £1,499. The maximum loan to value (LTV) is 90%.
Another HBOS Group company, The Mortgage Business, has announced an even cheaper 2 year fixed rate, and made it available for self certification customers wanting a loan up to 85% LTV. It is only suitable for larger loans because of the high arrangement fee of £1,999 but the fixed rate of 5.59% to 31/10/09 makes it very competitive even for borrowers who don’t need to self certify their income. Furthermore it is available for both purchases and remortgages and the maximum loan size of £1m is more realistic than the £500,000 maximum which now applies to most of Halifax’s competitive rates.
RBS Group has reduced the rate on their best 2 year fix from 5.99% to 5.85%, again without increasing the fee. The rate dropped for fixes arranged through the RBS brand last Tuesday and the same lower rate will apply for remortgages through its First Active brand from Monday. The remortgage product is particularly competitive because it has a lower fee of £699 than the £1,499 RBS charges for purchases, and in addition it offers a free valuation and free legals. As RBS announced this reduction before the turmoil in the markets over the last week this cut may say more about RBS wanting to rebuild its market share, which will have been pretty poor in the first half of this year, than anything else. But the change in market conditions will allow it more leeway to retain the rate for longer or cut it further.
Finally, some lenders have withdrawn their fixed rates and are waiting until the market settles down before announcing new rates. For example GMAC pulled its 2 year fixes yesterday and, contrary to their normal policy, is not immediately replacing them. Whether the new rates are higher or lower will primarily depend on where the market settles down and what GMAC’s new funding cost is going to be.
Categories: Mortgages, Interest rates
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