Average two-year fixed rate mortgages peaked at 7.08% at the beginning of July, since then numerous lenders have passed on cuts to their mortgage ranges. Today the average mortgage rate has dropped to 6.39%, which is around the same level seen just prior to the onset of the credit crunch. However, we should note that base rate was 0.75% higher at that time.
The average mortgage rate is a good indication of what is going on in the market, but what is more telling is what the largest lenders have done with their rates, as the top ten lenders make up 77.2% of the mortgage market (Source: CML).
the best news for consumers is that the UK's biggest mortgage lender, Halifax has passed on the biggest cut in rates to borrowers and unlike other lenders, the average fee on these deals has also dropped.Bradford & Bingley and Cheltenham and Gloucester have also passed on significant cuts, but this has been offset slightly by an increase in their average fees. Northern Rock's rates have remained virtually unchanged and their fee has increased by £500 showing that it is still unwilling to lend to customers.
The cost to lenders in obtaining the funds for mortgages on the money markets has dropped significantly in the last few months and we are now seeing some relief for borrowers who are looking for a new deal. The increase in borrowers monthly repayments should not be as much as it would have been had they remortgaged two months ago, which will hopefully mean more borrowers can afford to remain in their homes. I doubt we will see rates being cut to levels similar to when base rate was last at 5%, but we should hopefully see further cuts from the big lenders in the coming months. Only time will tell if we have finally turned a corner, but this is the most prolonged period of cuts we have seen since the credit crunch began.
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