Here comes the housing thaw

Personal Finance

ANOTHER good week formortgage borrowers, after lenders announced 0.25 per cent off the cost of home loans, down to record lows not seen since the early 1960s.

Meanwhile, for those trapped in negative equity, Halifax Building Society announced that house prices rose by 0.9 per cent in February.

What a difference a year makes. Only 12 months ago, mortgage rates were on the up, while the market was in the doldrums, with prices heading relentlessly downwards.

There are several lessons to be learnt. The first is that despite last week's rate cuts and the seeming revival of the market, buying a house is still risky when your main purpose for doing so is as an investment.

The second lesson is for anyone tempted to wait before fixing a mortgage at a better rate in a few months' time. Put simply: you may not get such a good deal if you wait, as our story on page 18 demonstrates.

Thirdly, there is a pool of borrowers who would move if they could but are unwilling to lose the chance of a shares handout from those societies either de-mutualising or being taken over.

Here, there may be a solution in sight. One small lender, FirstMortgage, is looking at finding a way round the problem, in such a way that borrowers could leave the bare minimum with the original lender and move the rest of their loan elsewhere. It is not yet certain that FirstMortgage will be able to put together the right package, but full marks to the company for trying.

Borrowers should considerwhat they are being asked to hold on for when they decide to stay with the Halifax, Alliance & Leicester or Woolwich.

Is it wise to lose out on a mortgage deal that could save you pounds 3,000 on a pounds 50,000 mortgage over three years in order to pick up pounds 1,000 in shares next year? I don't think so.

One final point. When Nationwide cut its mortgage rate last month to what was then a record for high street building societies - 6.99 per cent - other lenders scoffed at the idea.

This was a marketing stunt, they claimed. Yet what Nationwide did was to advance the argument that the margin between savings and borrowers' rates was too high. Its move, coupled with earlier ones from Bradford & Bingley, cut that margin so that savers did not lose out from the cuts.

Surprise, surprise, last week's mortgage cuts by other lenders have not so far been followed by savings reductions. This is a welcome move. But it raises the question: who was right then?

q Steve Lodge is on holiday.

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