Post Office slashes mortgage rates

Competition in the mortgage market intensified today after the Post Office slashed rates on a range of "first-time buyer friendly" products.

The biggest cut is on a three-year fixed-rate deal requiring a 10% deposit, with the lender's interest rate dropping from 5.99% to 4.75%.

It is withdrawing from the buy-to-let market for the time being so it can focus efforts on first-time buyer, movers and remortgage customers.

Borrowers have benefited from a raft of rate cuts in recent months because the Bank of England's base rate is expected to remain at 0.5% until 2013.

But there have been fears that the euro-zone debt crisis threatens to push up borrowing costs as banks demand higher interest rates to lend to one another amid the risk of a Greek default and slowdown in the world economy.

The Post Office said its five-year fixed rate of 4.99% for borrowers with a 10% deposit was the lowest in the market, although it requires a £995 fee.

Mike Cook, head of mortgages, said: "Many of the five-year fixes that are heavily advertised are only for borrowers with a large 25% to 40% deposit, which excludes many first-time buyers or those moving up the property ladder."

The Post Office, which lends through a joint venture with the Bank of Ireland, was the UK's 12th largest lender last year, according to the Council of Mortgage Lenders. Four in 10 of its borrowers are first-time buyers.

PA