There is a faint glimmer of hope that the fixed rate mortgage market is returning to some sort of normality. New mortgage borrowers are now finally benefiting from this, as lenders pass on a string of welcome interest rate cuts on their popular fixed rate deals.
Moneyfact.co.uk has used a key barometer of the average two-year fixed rate over the past few months to analyse the trends of the overall fixed rate deals against the volatility of the swap market, the borrowing fixed rates used between financial institutions.
The average two year fixed rate peaked at 7.08 per cent on 11 July '08, its highest in over a decade after swap rates also peaked at 6.52% on 16 June '08, reflecting the lag time for swap rates to reach the mortgage market is normally around two to three weeks.
Several lenders, such as Halifax, C & G, Nationwide BS and HSBC have trimmed their mortgage rates over the past two weeks, which has resulted in the average two year fixed rate dropping to the current 6.95 per cent. Halifax, C & G, Abbey, Nationwide and HSBC , which supply the majority of overall mortgage lending, have a collective average two year fixed rate currently at 6.76 per cent.
It is encouraging that, at long last, lenders are responding to the easing in wholesale borrowing costs and passing a discount on to the consumer. There is a sense that competition is finally returning to the fixed rate mortgage market, which will benefit the borrower.
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