Fixed-rate mortgages start falling again

AFTER several weeks of slowly climbing, many fixed mortgage rates dropped again last week. Several lenders have cut their rates by up to 0.5 of a percentage point, and many others are expected to follow suit in the next few days, writes Neasa MacErlean.

Housebuyers can thank the German Bundesbank. Its recent cut in interest rates has fed through the money markets to make borrowing cheaper for the British banks and other users of the wholesale money markets.

Capital Home Loans, the TSB, BNP Mortgages and the Northern Rock Building Society all cut their fixed rates last week.

Mortgage lenders have seen business tail off in the past couple of months after a pick- up at the start of the year. They are competing aggressively for whatever signs of life are left in the summer market before the holiday season gets into full swing.

The TSB, for example, has chopped 0.46 of a percentage point off its five-year fix, bringing the rate to 7.99 per cent - the current variable rate with most lenders. Its three-year rate has fallen from 7.75 per cent to 7.45 per cent. BNP Mortgages has cut its fixed-rate mortgages by an average of 0.25 of a percentage point as part of a move to reposition itself in the mortgage market.

The new Northern Rock five-year rate is particularly competitive. It has been cut from 8.20 per cent to 7.98 per cent - just under the prevailing variable rate of 7.99 per cent.

Capital Home Loans has brought down its two-year rate from 6.79 per cent to 6.49 per cent. Its five-year rate has come down from 8.29 per cent to 8.20 per cent. First-time buyers are more likely to go for the shorter-term fixed-rate mortgages, while the more experienced borrowers tend to be more interested in a five-year span.

Barclays Bank has brought out a new range of fixed mortgages including 20- and 25-year fixes at 9.75 per cent.

It has a special deal on the three-year 7.65 per cent fix for first-time buyers, who pay 6.65 per cent for the first year.