Five Questions About: The mortgage rate war

It's war is it? Great news. Good deals all round then?

Not really. There has been a swathe of five and four-year fixed rate mortgages launched at record lows of less than 3 per cent, but they're only available to those with huge deposits.

Huge? Will 25 per cent do?

Nowhere near enough. You'll need a deposit of 40 per cent to qualify for the tempting rates launched this week.

Well, surely they'll soon launch great deals aimed at first-time buyers?

That's unlikely. The mainstream lenders are still very risk averse. They only want to lend to people who are excellent prospects.

So it's a bit of a bogus war?

The likes of NatWest and Nationwide are trying to cherry-pick the best customers. Tying them into longish fixed rates is good business as it guarantees future income streams. The banks also benefit from the cash injection of very high arrangement fees.

Aren't arrangement fees a bit of a con?

Yes. Lenders offer attractive low rates while bumping up the fees. NatWest, for instance is charging a massive £2,450 upfront to anyone who takes out one of its 2.99 per cent five year loans. Many could be better with a higher rate but lower fee.