Hope for mortgage market
Mortgage rates could now fall
Thursday, 30, Oct 2008 03:07
Interbank lending rates are dropping, bringing hope that banks could soon be cutting the price of fixed-rate mortgage deals.
The London Interbank Offered Rate (Libor) has dropped to 5.93 per cent and the two-year swap rates - used to set fixed rate mortgages - are down to 4.33 per cent.
These falls could bring cheaper mortgages for the new year.
Kevin Duffy, chief operating officer of broker Mortgageforce, said: "Lenders may have more space to reduce some rates now, as this fall in their cost of funding starts to percolate through to their product pricing, particularly fixed rates.
"Lenders will now start competing for low loan-to-value assets which improve their capital as well as allowing them to build pipelines to enter the 2009 calendar year with."
He added the rise in remortgage levels recorded by the Bank of England in September could be response to the lowering of rates.
However, he stated "the loss of wholesale funding and buyer confidence has strangled the purchase market," which is seeing a third of the level of activity on a year ago.
Two-year swap rates
Three-month LIBOR rate
Mortgageforce also put forward its mortgage best buys, leading with Northern Rock's two-year fixed rate mortgage that has dropped by 0.14 per cent to 5.35 per cent for a £1,995 fee. However, deposits of 25 to 30 per cent are needed.
Mr Duffy said: "Northern Rock's flexibility makes it a good buy, as you can overpay the whole debt down to £1, and borrow it back at the same rate, so borrowers who wish to take extra at the outset, need only pay it straight back in immediately to create an emergency payment holiday cushion for themselves."
Abbey and Nationwide were highlighted for leading the remortgage market.
For remortgages up to 85 per cent loan-to-value (LTV) Nationwide offers a 6.33 per cent two-year fixed rate with the arrangement fee is £999, while for remortgage deals up to 70 per cent LTV Abbey has a 5.39 per cent two-year fix with a fee of £1,499
Find market leading mortgage rates using our best buy tables.
