Mortgage deals are likely to get cheaper

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The Independent Online

People planning to remortgage or fund a house purchase may find that the deals on offer get cheaper over the coming weeks and months, mortgage industry insiders have said.

The release of the minutes of the April meeting of the Bank of England's Monetary Policy Committee last week has quashed rumours of an imminent rise in base rate. This led to lenders including the Woolwich, Skipton and the Halifax cutting some fixed-rate mortgage deals.

"What is happening is that the money markets priced a more immediate Bank rate rise into the cost of mortgages. Now it seems that this may not take place until August or even next year. This is starting to feed through to rates," said Brian Murphy, the director of the Mortgage Advice Bureau.

The downward pressure could continue, said Ray Boulger, the technical director of broker Charcol. "Fixed rates could go even lower. The market is still anticipating rates going up more quickly than they actually will. The fact that inflation went down rather than up last month was a bit of a game changer," he said. The best-buy, five-year rate available though the Yorkshire Building Society is 4.19 per cent but Mr Boulger thinks even cheaper rates could soon be in the offing. "Fixed rates could get as low as 4 per cent," he said.

But Mr Murphy warned against people gambling too much on rates going much lower. "We have seen as many people moving their mortgages to new providers as at anytime since before the credit crunch, and you can understand why. Rates, although there may be some downward moves over the summer, are abnormally low and those locking their rate in now are definitely getting the deal near the bottom of the market."

Tracker mortgages are also becoming more keenly priced. David Hollingworth from London & Country mortgages said, "Mortgages that track the base rate for the lifetime of the mortgage are interesting at the moment. ING Direct and HSBC are offering lifetime tracker rates at just 1.85 per cent above the base rate and 1.89 per cent respectively, and that's with no fee."

Those with smaller deposits – such as first-time buyers – will also be cheered by the latest moves in the mortgage market. "Some lenders have cut their rates on higher loan-to-value mortgages – 80 or 85 per cent – more aggressively. This means the price differential between higher and lower loan-to-values has narrowed a touch," Mr Hollingworth said. In particular, he cited ING Direct's three-year, fixed-rate mortgage at 80 per cent LTV priced at 4.49 per cent with no fee.

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