Rate Wars 2 – This Time It’s Personal
15th September 2014
There have not been many periods that I can remember that has seen swathes of rate reductions from lenders against the backdrop of an expected future increase in the Bank of England Bank Rate, but then again we have been living through extraordinary times for a while now.
When rates began to increase once more a few months ago, there were very few who thought they would reduce again before the Bank of England finally acted, but whilst we may not quite see the levels we saw previously, it looks more and more likely that we will get close.
Nationwide, Barclays, Accord Mortgages, Leeds Building Society and Virgin Money have all announced rate reductions in recent weeks amongst others, many reducing rates on products for first-time buyers with only a 10% or 15% deposit. As a result there are now a range of lenders offering 90% mortgages way below the 4% level.
Elsewhere, the 5 year fixed market is one of the more extra-ordinary features of the current conditions as lenders such as Virgin Money, Woolwich and Nationwide breaking the 3% floor once more, with Virgin Money now offering 2.79% fixed until 01/12/2019 (4.0% APR).
Two year fixes have also fallen well below the 2% level, with Woolwich again amongst others offering a product at 1.89% fixed (3.7% APR), for 2 years above £500,000 and Virgin Money at 1.79%, (4.2% APR).
Meanwhile, variable tracker rates are available from just 1.69%, (3.7% APR) through Nationwide.
We have also seen lenders reportedly easing their affordability calculators meaning that some borrowers may be able to borrow slightly more than they could last week with certain lenders.
All of this is down to a very simple factor: competition. The implementation of the Mortgage Market Review, (MMR) in April led to a period of difficulty for many lenders as they not only had to work through new systems and processing, but also train all their staff. This led to a decline in the amount of business that they could handle which has now left many lenders behind their annual targets and desperate to make this up.
As soon as the slower summer period took effect lenders took action and this looks set to remain hotly competitive right up to the end of the year.
We are also seeing perhaps the lowest product rates ever on Buy To Let Mortgages as more and more lenders see this as an attractive arena to lend in as they can charge higher rates and fees without taking on a great deal more risk.
As a result we are seeing Buy To Let products available at 2.09% on a 2 year tracker basis, (4.3% APR) with reasonable fees of £1,995 and 5 year fixes from 3.54% with fees of £930, (5.4% APR).
Lenders are also reaching out to keep existing clients on board, offering some very competitive products for those looking to remortgage or those who just want to switch products with their existing lender.
The only real fly in the ointment is the potential issues that could arise if the Scottish Independence Vote is won by the yes camp. The resulting uncertainty could well lead to a sudden increase in the cost of funds for lenders and hence mortgage rates for borrowers.
With rates this low the remainder of the year looks like it will be a key time for those that can to lock in whether they are looking to purchase their new home, remortgage or invest in a buy to let property.
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Andrew Montlake, Director and Spokesperson for Coreco, gives his honest and forthright views on the mortgage market, economy and all things property related. Monty was voted "Mortgage Personality of the year 2008", "Best Press Spokesperson" in 2011 and is the current holder of the British Mortgage Awards “Best Marketeer” title. Expect expert analysis, delivered in a down to earth style with a side helping of exuberance.