Halifax Cuts Mortgage Rates For a Third Time In a Month
Halifax the UK’s biggest mortgage lender, announced it is cutting some of its interest rates for new borrowers, the third time it has done so this month.
The changes, will come into effect on 26 July 2008, will cut the rates on 16 different deals by up to 0.3%.
the Bank of Scotland part of the Halifax is also cutting the cost of 29 different mortgages.
Halifax said the reductions were a response to the recent rate cuts by its competitors.
“We are just pricing in line with the market,” said a spokesman.
Some of the most popular sort of mortgages, those fixed for two years, are not being changed as their rates were cut the previous weekend.
But three and five-year fixed rates, and the bank’s two-year tracker rate, are coming down by as much as 0.18%.
House sales have slumped by 50% in the past year and are heading lower with mortgage approvals currently down 67% on a year ago.
Halifax denied it was desperate for business and said it still expected to account for 20% of the market.
It pointed out that it was not altering the size of the deposits it required from borrowers nor was it changing the up-front fees for each deal.
Two-Year Fixed-Rate Mortgage Deals Hit 7%
It means these loans are more expensive since February 1997.
The tightening of credit and mortgage shortage of funds has led to a sharp increase in the cost of borrowing to buy a house.
With lenders require large deposits, the number two-year fixed rate mortgage offers available for loans of 95% has almost disappeared, only 12.
Moneyfacts said that the increased cost of loans between lenders passed directly to customers.
“Lenders are also taking a greater margin at the top, since the prices of their products at risk,” said Darren Cook at Moneyfacts.
“The average level of variable rate (SVR) today stands at 7.02%.
“With most lenders do not charge a fee for their product moving to SVR, this is becoming a more viable option for many at this time,” he added.
Limited choice
Two-year fixes have been among the most popular types of loan in the past two years, especially among first-time buyers.
But the former wide selection of short-term concerns is rapidly disappearing.
The Woolwich, for example, now offers only a period of five years or 10 years to fix. The Bristol & West has only a five-year period compared to offer, like his father’s bank, Bank of Ireland.
“The kind of choice that is first-time buyer is now very limited,” said Aaron Strutt to mortgage brokers Chase De Vere.
Previously, the British Bankers’ Association, revealed that the number of mortgages that were approved for house purchase has fallen by almost 60% over the past year because of the mortgage squeeze.
Rising costs
With lenders to have their ration of money, all major mortgage companies such as Halifax, Nationwide and Abbey, have been pushing up the cost of their mortgage loans.
This has been reflected not only in higher interest rates but also increased demands for deposits and payment in advance of broader agreement fee, which could previously be rolled into the loan.
With the collapse of housing prices, lenders have been motivated by a desire to protect themselves against the possibility of losing their money if borrowers default on their subsequent payments.
In January, the average of two years will set a price of 6.61%.
Already in June last year, concerns like these costs were borrowers only 6.2% - nearly one percentage point cheaper than the current average rate of 7.02%.
The increase in the past year have added £ 77 to the monthly cost for someone to draw a typical home loan of £ 150000, with both interest and capital payable in 25 years.
Such a loan will now take £1,073 out of a borrower’s earnings.
