Time to cash in on mortgage rate bargains

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DESPITE doom and gloom in the housing market - or perhaps because of it - there are still bargains to be found both for new buyers and existing borrowers wanting to take advantage of better rates, writes Nic Cicutti.

Lambeth Building Society is offering to peg mortgages to 6.65 per cent APR until May 1998 on loans of up to 80 per cent of property value. It will also rebate 0.5 per cent of any advance back to the borrower.

TSB is offering the security of a 10-year fixed mortgage rate of 8.84 per cent, while Birmingham Midshires has a five-year fixed rate of 7.8 per cent for borrowers wanting loans of up to 70 per cent of value.

First-time buyers can also snap up some tasty offers. Yorkshire Building Society is cutting its rates to 2.34 per cent for one year before shifting borrowers back to the full variable rate. Newcastle Building Society will fix at 5.45 per cent for two years.

Discounts still have life in them. Scarborough BS will discount its normal 8.45 per cent rate by 6.5 per cent until July next year, giving a present interest rate of 1.95 per cent. Greenwich BS is prepared to cut its usual variable rate of 8.45 per cent by 3.5 per cent for two years, leaving borrowers to pay 4.95 per cent at present.

Longer term, Leeds Permanent will discount its variable rate by 1.5 per cent for five years. This means its current variable mortgage of 8.39 per cent drops to 6.99 per cent for now.

Of course, discounts involve a calculation that mortgage interest rates are likely to remain steady at their present level or even fall back again in the next year or two. In recent months money markets have gradually brought their long-term interest rates down. This will be seen as a small boost for borrowers.

Despite the seeming attractions of deals now available in the market, millions of borrowers prefer to stick with their existing lenders' variable rates. A new crop of variable offers available by telephone may well persuade some to switch.

Bradford & Bingley's hassle-free telephone mortgage arm charges a variable rate of 7.3 per cent, compared to the average from other lenders of 8.4 per cent. The society also gives a pounds 300 rebate and one free valuation with each mortgage, which must be for no more than 75 per cent of a property's value.

Bank of Scotland's' telephone mortgage arm charges 7.34 per cent on loans of up to 85 per cent of value. It offers a free valuation, and will not charge mortgage indemnity protection, which could shave hundreds of pounds off the cost.

First Direct, the telephone banker, charges 7.39 per cent to first-time buyers on a loan-to-value of up to 95 per cent. Direct Line, the motor and household insurer, is now also moving into the mortgage market. Its rate is 7.42 per cent, plus a valuation fee refund and no mortgage indemnity charges.

But it pays to move quickly, if only because an important safety net will be snatched away by the Government after October when new borrowers losing their jobs will not receive mortgage interest payments from the Department of Social Security for the first nine months.

Existing borrowers will be paid 50 per cent of their interest after two months. After six months full mortgage interest on loans up to pounds 100,000 will be paid.