Halifax bids to halt loan slump

HALIFAX YESTERDAY made a fresh attempt to rebuild its share of the mortgage lending market by issuing its lowest-ever fixed-rate loans. Customers will now be able to fix rates at 4.45 per cent for two years.

Halifax, which last year saw its share of the mortgage market shrink to 6 per cent, less than one-third of its usual level, is also offering to fix loans at 6.25 per cent for as long as 10 years.

The move will help prevent customers from defecting to other lenders in order to take advantage of cut-price deals made possible by unprecedented falls in long-term interest rates. In 1998, remortgages made up 25 per cent of the mortgage market, compared with 15 per cent in 1997.

While Halifax is not offering the cheapest deal in the market, it is competing with a rate of 3.99 per cent on offer from Alliance & Leicester. The lowest two-year fix is 2.99 per cent from West Bromwich building society.

The cheapest deals are only made possible by hefty "trailer penalties" - redemption penalties that tie customers in for years after the fixed- rate period is over. The typical redemption penalty is 5 per cent of the sum repaid.

Without the trailer penalties, Halifax charges 6.2 per cent for a two- year fix. West Bromwich offers 4.99 per cent - but customers must pay a sizeable application fee of 0.35 per cent of the loan.