In spite of the euro debt crisis or the parlous position of some banks, the cost of many mortgage deals in the UK is falling. Nationwide has become the latest lender after Woolwich, Halifax and Skipton to cut the cost of its new fixed-rate deals.
It said it was cutting the rates on its two and three-year fixed rate deals by up to 0.3 per cent. As a result the Nationwide's three-year fixed rate is currently priced at 3.30 per cent and the two-year deal at 2.89 per cent.
The lower rates in the fixed-rate mortgage reflects renewed competition among lenders, says David Hollingworth from broker London & Country. "This competition is sparked by lenders eager to ensure that they meet their targets," he said. "That means fighting harder on price for the business especially as the lending market remains relatively subdued."
In addition, the prospects of a UK interest rate rise this year seem to be receding, with the minutes from the last Monetary Policy Committee meeting showing a most members in favour of keeping interest rates on hold. "Fixed rates have now fallen to all-time lows, on the back of falling money market rates," said Melanie Bien, below, a director of independent mortgage broker Private Finance. "These Swap rates are factoring in the likelihood that an interest rate rise will not happen until next year at the earliest."
However, Ms Bien cautions against rushing into a fixed-rate deal. "Whether to fix depends on your circumstances, attitude to risk and what you think will happen with interest rates. The majority of our clients are opting for base-rate tracker mortgage, particularly those which are penalty free or have a 'switch to fix' option."