Which can only be good news can’t it?
However, the slight downside is that you will you will need a large deposit to get the full benefit from the best deals. The average loan-to-value (LTV) offered by mortgage lenders is 80%; down from 90% per cent a year ago.
It is 12 months since we first started using the term credit crunch and this has led to the the rapid shrinking of the mortgage market as many deals were removed and interest rates were raised.
Now some experts believe that the situation is now “steadily recovering”.
Michelle Slade at Moneyfacts said:
“Over time the mortgage market should continue to improve from its current position. The number of products will steadily increase and rates will lower with increased competition between lenders.”
However, there was also a warning that recovery will be slow in the months ahead. Whilst swap rates (the rate at which banks lend to each other that usually determines fixed rate mortgages) are falling, other factors may keep the cost of mortgage borrowing high.
For instance, the market in mortgage-backed securities, which the banks used to fund almost two-thirds of lending in previous years, is effectively closed.
Last week Northern Rock reported that it lost £585m in the first six months of the year compared with a profit of almost £300 million over the same period in 2007.
More importantly, several mortgage lenders, including Northern Rock, have now reduced the cost of their fixed rate mortgage deals.
The good news is that the average 2 year fixed rate from the 5 biggest mortgage lenders is now 6.43%. The same rates hit an average of 6.92% last month.
Northern Rock’s new fixed rate mortgage offers all come with a fee of £1,495 and their are different rates for different levels of deposit:
- 10% deposit 7.19%
- 20% deposit 6.34%
- 25% deposit 5.89%
Abbey also announced small cuts on its fixed-rate deals, while Lloyds TSB announced lower rates for those of you with a deposit of 40%. Halifax, Cheltenham & Gloucester, Nationwide and HSBC have also cut their fixed rates in recent weeks.
So, even thought the mortgage market is a long way from being where it needs to be, it seems that mortgage lenders are trying to win us back again with some competitive offers.
And that can only be a good thing.
Any help in these tough financial days is to be welcomed isn’t it?
(Please note that articles on Money Hospital do not constitute regulated financial advice. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. All rates are correct at time of printing but are subject to change without notice)