UK NEWS

HOME LOANS GET CHEAPER AT LAST

RELIEF: The cost of mortgages is finally falling

Tuesday August 12,2008

By Sarah O’Grady, Property Correspondent

Comment Speech Bubble Have your say(4)

THE cost of mortgages is finally falling as the housing crisis shows the first signs of recovery.

Latest figures from the Bank of England reveal that the interest on fixed-rate two-year deals – the most popular form of home loan – has fallen for the first time since February.

The news will be welcomed by millions of struggling home owners and first-time buyers desperate to enter the housing market.

In a climate of steadily rising costs squeezing household budgets like never before, the first signs of cheaper mortgages have given the property sector a much-needed boost.

The average interest rate on a two-year deal stood at 6.36 per cent in July for borrowers with a deposit of 25 per cent, down from 6.6 per cent in June, according to the Bank’s latest data.

While the overall cost of all fixed-rate mortgages is still more expensive than a year ago, it is now down significantly from the eight-and-a-half-year high in June.

Nicholas Leeming, director of propertyfinder.com, said: “This is an early indication that the Bank of England’s cash injections are finally filtering down to help borrowers.

“We can’t rely on lower base rates while inflation looms large. So to see some lenders actually cutting their mortgage rates is a very positive sign and indicative of the recent reduction in interbank lending rate.

"It’s early days, but if lenders actually begin to pass on the benefit of previous cuts to borrowers, and competition returns to the market, we could really begin to see light at the end of the credit crunch tunnel.”

Property experts also expect there to be increasing choice as the mortgage drought which has frozen the housing market since the onset of the credit-crunch starts to ease.

Ray Boulger, of mortgage broker Charcol, said: “We’ve now got lenders competing with each other on rates to get more business.”

House prices are also becoming more affordable as sellers price more realistically, the Royal Institution of Chartered Surveyors said yesterday.

Fewer surveyors also reported price falls coupled with more buyer inquiries for the third month running.

But these improvements were in danger from continued speculation over whether ministers might temporarily suspend stamp duty in an attempt to revive the housing market.

The Bank of England’s figures follow a raft of rate cuts from most of the leading lenders.

Rates are coming down despite Bank of England policymakers keeping the base rate on hold for the fourth month in a row last week at five per cent.

But the falls are being seen as a response to significant declines of nearly one per cent in swap rates, upon which the loans are based.

Swap rates track the rate at which banks lend to each other, known as the London interbank offered rate, which rocketed when the credit crunch struck.

CHEAPER MORTGAGES

12.08.08, 9:41pm

Imagine how much cheaper mortgages would be if house prices hadn't risen to such unaffordable levels in the first place.

It's about time people realised that high prices are not good news.

• Posted by: Simon1 • Report Comment

MILES CHEAPER

12.08.08, 6:03pm

Of course home loans are getting cheaper....the prices are coming down fast.
For the first timers, that 150k house of a year ago is now 120k, so the mortgage is miles cheaper.
Markets like this take a long time to reverse, particularily as so many banks have got their fingers badly burned.

• Posted by: stevewo • Report Comment

HOME LOANS TO GET CHEAPER?

12.08.08, 9:01am

Well, that's the end of Daffy Darling's imaginary stamp duty holiday then!!

• Posted by: beefsandwich • Report Comment

BUY MORE BUY TO LET

12.08.08, 8:42am

SO THE MORTGAGE RATE FOR SOME LENDERS HAS REDUCED BY 0.24 % IF I HAVE 25% DEPOSIT
WOW
IF PROPERTY FINDER.COM
CHARCOL MORTGAGE BROKER
ROYAL INSTITUTE OF CHARTETERD SURVEYORS
SAY THINGS ARE GETTING BETTER IT MUST BE TRUE ?
I AM GOING TO BUY SOME MORE BUY TO LET
WHAT COULD GO WRONG ?
ha ha ha ha ha ha ha ha !

• Posted by: mg415 • Report Comment