Banks and Building Societies Slash Mortgage Interest Rates

Consumers have been fearing a rise in interest rates recently, however a number of banks and building societies have just announced mortgage rate falls, which should help reassure property owners that the cost of their mortgages is unlikely to rise in the near future.

The announcement that two of the interest rate setters in the August Monetary Policy Committee (MPC) meeting had voted for a rise in interest rates, sent shivers through the property market as borrowers worried that the era of record low interest rates was likely to end soon.

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The rest of the MPC voted to keep base rates at 0.5% and the subsequent announcements that inflation in July had fallen to 1.6%, well below the target of 2%, and that wages had also fallen slightly, points to the possibility that borrowing costs will remain low for the foreseeable future.

This outlook appears to be encouraging a number of banks and building societies to retain the competitiveness by reducing some of the mortgage interest rates, particularly for low LTV products.

Yorkshire Building Society has announced a reduction on interest rates on ten of its 65% and 75% LTV mortgages. This means that the costs of a two year fixed rate mortgage, with a 65% LTV, has fallen from 1.74% to 1.6%, however there is a £845 application fee. Their five year fixed rate has also been reduced to 2.89%, again with the £845 fee.

The changes come into effect today (Monday September 15) and are available to customers online, in branch and by phone.

Chelsea Building Society has cut the cost of its lowest rate mortgage to just 1.55% as part of reductions on six of its 65% loan to value (LTV) mortgages. The society is reducing interest rates by up to 0.24% on its two-year and five-year fixed rate mortgages, including offset equivalent products.

The rate changes also come into effect today.

These welcome rate falls come hot on the heels of mortgage reductions from Barclays on its 2, 3 and 5 year residential fixed rates. The bank has also launched a new competitive 70 per cent LTV two year fixed rate as well as reducing both 70 per cent BTL 2 years fixed rates by 0.30 per cent to 2.99 per cent.

VirginMoney has also joined the party with reductions of up to 0.26% on two year fixed rates and fals of up to 0.2% on five year fixed rates. These reductions also come into effect today.

House sellers seem to have taken encouragement from the prospect of continuing low interest rates as Rightmove is reporting that the average asking price for a house in the UK has risen by 0.9% (up to £264,875) in September following the 2.9% contraction in August.

However as Russell Quirk, Founder & CEO of eMoov.co.uk, points out, these are asking prices and not the sale outcomes.

“It’s clear that the rate of increase in pricing is slowing and which indicates that sellers are becoming more realistic, especially in the capital.

“But this is a good thing. The media hyped increases in value over the past 12 months or so, especially in London, were completely unsustainable and this cooling will make for a more sensible balance in the short to medium term. It may even stave off an interest rate hike given the Bank of England’s prior warnings that an overheating housing market would trigger such a reaction.”, Quirk went on to say.

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