Certain borrowers can now secure a mortgage rate below 3 per cent as lenders have taken the axe to their new deals following last week’s base rate cut.
HSBC on Wednesday launched its cheapest mortgage ever, a variable rate deal priced at 2.99 per cent, for customers who fit certain criteria.
Alliance & Leicester will cut its best two-year fixed rate to 3.19 per cent on Friday, while Abbey and Woolwich have released new rates starting from 3.69 per cent and 3.79 per cent respectively.
Few rate reductions have reflected the full half point base rate cut, however, as banks continue to enhance their profit margins.
“There are some very good rates out there now, although many are still not coming down as fast as we might expect,” said Melanie Bien at Savills Private Finance, the mortgage broker. “We are in a new regime and lenders are not being ultra competitive. They are concentrating on margins and being very selective about who they lend to.”
To qualify for HSBC’s 2.99 per cent rate borrowers must have savings or investments of at least £50,000 with the bank or a mortgage of at least £250,000 and a minimum income of £75,000.
For other customers the rates are higher. Tracker rates start at 4.09 per cent for borrowers with a deposit of 25 per cent or 3.45 per cent for those with a deposit of 40 per cent. HSBC’s cheapest two-year fixed rate is 3.99 per cent.
Woolwich passed the full half point cut to its five-year fixed rates but cut its tracker rates and shorter term fixed deals by 20 basis points. Meanwhile Abbey cut rates by around 30 basis points.
Abbey and Woolwich restricted their best new deals to customers with deposits of 40 per cent. Abbey, for example is offering these customers a two-year fixed rate of 3.99 per cent with a £995 fee.
Some new rates also carry extremely large fees. Abbey is offering the same 3.99 per cent rate to customers with smaller deposits of 25 per cent but they must pay a fee of £1,995. Some of A&L’s new rates will have fees of 2 per cent of the loan.
Meanwhile, Bradford & Bingley is offering to waive early repayment charges for customers who repay their buy-to-let mortgage or switch it to another lender.
The group, whose mortgage arm has been taken over by the government, is encouraging customers to leave as it said it was no longer able to provide any new lending and may not be able to offer competitive deals in the future.
David Hollingworth at London & Country Mortgages said that while this opened up options for landlords, many might find it difficult to switch to a better deal as buy-to-let lenders have scaled back maximum loan-to-values and have not passed on rate cuts.
