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Reduction in mortgage rates, but a long way to go

Reduction in mortgage rates, but a long way to go

Category: Mortgages

Updated: 07/10/2009
First Published: 07/10/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
A handful of high profile providers have significantly reduced the rates of their home loan offers, prompting a flurry of activity in the mortgage market.

In the first week of October, Abbey has reduced selected fixed rates by up to 0.11 per cent, while Northern Rock slashed some 0.30 per cent from the rates on some of its mortgage products .

Cheltenham & Gloucester also got in on the act, reducing its five year fixed rate deal by 0.36 per cent to 5.99 per cent, while Woolwich announced its lifetime tracker rate would fall to 2.79 per cent - a reduction of 0.45 per cent.

The most significant cuts have come from Nationwide Building Society which, as well as reducing selected variable tracker rates by 0.36 per cent, cut selected fixed rates for one and two years by as much as 0.70 per cent.

Louise Holmes, spokesperson at commented: "Such positive steps certainly make for refreshing news and are a move forward from the barrage of criticism suffered by lenders over the past months.

"As well as offering some hope to consumers who have struggled to find a decent mortgage rate, it also suggests that the banks and building societies may be launching products with a view to competition, after a lengthy period focusing solely on risk.

"These changes are a step in the right direction with lenders cautiously dipping their toes back into competitive waters; however a full return to a competitive mortgage market is certainly a long way away off."

Potential homeowners without a sizeable deposit are still likely to face a stiff challenge as the most of the changes have been made to products which have loan-to-values of around 70 per cent.

"It's good to see that big players have decided to take some action. But we would need to see more than a dozen lenders doing the same thing before we could really say competition was returning to the market," added Holmes.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.