Lenders battle to woo buyers over the threshold: Vivien Goldsmith looks at the array of free valuations and discounts on offer as competition heats up

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A MORTGAGE price war has broken out. It is bringing down the cost of taking out or moving a home loan as lenders scrabble for business.

Buyers are being wooed with free valuations, cash, competitions and huge discounts on variable rate loans as well as temptingly low fixed rates.

The fierce competition among lenders is doing more to cut the cost of home loans than the Government's minute 0.25 per cent cut in lending rates this week.

Cheltenham & Gloucester Building Society has abolished all valuation fees. This will save pounds 160 on a property worth pounds 55,000, or pounds 450 on one valued at pounds 450,000.

Buyers should still have a survey done to check the condition of the property. This would now cost pounds 145 on a property valued at between pounds 40,000 and pounds 80,000 or pounds 220 on one at between pounds 175,000 and pounds 200,000.

The society will pay the valuation fees itself and will also hand over a cheque for pounds 50 to buyers who have their mortgage interview at one of their branches.

Halifax Building Society is already running a scheme to refund buyers' valuation fees, although an earlier pounds 250 cash-on-completion offer has ended.

Now Woolwich is offering first-time buyers who opt for a variable rate loan a refund of their valuation fees up to pounds 390 plus a cheque for pounds 200 on loans under pounds 60,000 and pounds 400 on larger loans. But this is a limited offer (although there is no end date set) and buyers have to find the money for the valuation in the first place and only get it returned on completion.

Leeds is mounting a promotion during February involving a free valuation or pounds 250 in cash.

Andrew Longhurst, chief executive of C&G, said: 'No fees means a very healthy saving and coming hot on the heels of several other valuable initiatives is further evidence of our determination to pass the benefits of our cost-efficiency on to our customers.'

Charles Wycks, head of lending at Leeds, said that as the society had kept its costs in check it could afford to make attractive offers to borrowers without having an impact on savers.

'We are mounting a major offensive and firing on all fronts,' he said. The society, like C&G and Halifax, has a strong credit rating and is able to use this in the money markets when setting up fixed-rate loans. It has a five-year fix at 6.75 per cent for 80 per cent loans and 6.95 per cent for 95 per cent loans.

While C&G has a 3 per cent discount on variable loans for those with a deposit of at least 20 per cent, Leeds is offering the same discount for first-time buyers with a 10 per cent deposit.

Northern Rock is offering a pounds 1,000 cheque to borrowers taking out a variable loan, or pounds 1,100 for existing Northern Rock borrowers, if they go straight on to the variable rate of 7.74 per cent and give up the discounts on offer. They are 2.24 per cent for loans over 90 per cent until April 1995, and 4.24 per cent for those with larger deposits.

Andy Kuipers of Northern Rock said: 'We are in effect giving buyers the discount up front in cash. On a pounds 50,000 loan, a borrower completing quite soon would save about pounds 1,500 with the discount. People have the choice.'

Bradford & Bingley is launching a competition, Winning Mortgages, which asks borrowers to guess the value of a property. It will pay the winner's mortgage, however large.

John Charcol, the mortgage broker, has a loan with a 5 per cent discount, which brings the rate to just 2.75 per cent until January 1995. Ian Darby, marketing director of John Charcol, said: 'The last time rates were this low was in 1950 when Attlee was prime minister, petrol rationing ended and England's footballers lost 1-0 to the US in the World Cup.

'There is no sign of a floor on rates, although money market rates on five-year money have been edging up to make offers of fixed-rate loans at 6.99 per cent look rather tight.'

But he added that he did not expect any sudden rises in fixed rates.

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