Price war on sub 1% mortgage products
Mortgage rates are at historically low levels, allowing buyers in a position to put down a significant deposit to pay very little interest on home loans.
According to data from Moneyfacts, between July & August, the number of products available increased by 148, from 4,512 to 4,660.
An increasing number of high-profile lenders are now offering sub 1% mortgage products, with some available on a fixed-term rate for up to five years.
Halifax has launched its latest product, a two-year fixed-rate deal priced at 0.83%. The mortgage comes with a fee of £1,499 and is available for purchases between £250,000 to £1m.
The announcement of the ultra-low rate, which is available to those wishing to take out a loan worth up to 60% of the value of their home, comes amid a flurry of rate-cutting by some of the UK’s biggest lenders.
HSBC and TSB last month both announced two-year mortgages at 0.94% and Nationwide building society became the first to offer a five-year deal below 1%.
Rhys Schofield, Managing Director at Broker Peak Mortgages and Protection, said:
“Where the UK’s largest mortgage lender goes, others will surely follow.”
But he cautioned:
“These headline grabbers often come with significant setup fees and Halifax are about the only high street lender still charging for a basic valuation, which means that for many people the cheapest deal overall often lies elsewhere.”
Lewis Shaw, the founder of broker Shaw Financial Services, said Halifax’s rate was “stupendously low”.
“I’ve never seen anything like this in all the years I’ve been broking,” he said. “What this really tells us isn’t that lenders are wanting a rate war, more that lenders are as keen as mustard to get super low-risk business on their books, probably to balance out the higher loan to value lending they’ve had their hands forced into.”
The competition to attract borrowers comes amid signs that Britain’s house price boom is cooling.
Source: Forbes, The Guardian, Moneyfacts
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