A 1% fall in fixed rate mortgage deals from 21st January
In some good news for house-hunters in the new year, the Nationwide building society has cut its fixed rate mortgage deals by between 0.09 and one percentage point.
The move will affect its two, three, and five-year deals and will come in from 21 January. The Nationwide had already decided to cut its standard variable rate by 0.5% to 3.5%, following the recent cut in the official Bank Rate.
The society has claimed that its latest move had been prompted by a cut in the cost of borrowing on the financial markets.
As their website says, “recent reductions in swap rates have enabled us to cut the price of our fixed rate mortgage deals.”
“The financial climate remains volatile so we will continue to monitor market conditions, offering lower mortgage rates and deals where it is prudent to do so,” it continued.
The changes mean the interest charged on the Nationwide’s fixed rate deals will range from 4.39% to 7.09%, depending on how big the loan is in relation to the value of the property, and the length of the loan.
However, the financial information service Moneyfacts has said that most lenders have, so far, failed to pass on the full effect of the recent bank rate cuts to their new mortgage deals.
In recent months, lenders have been quick to point out that the increased margins are as a result of the increased risk that they faced. Now that the government has stepped in to reduce that risk, borrowers will be hoping that not only will the banks start to lend again, but that the reduced risk is passed on with lower rates being offered. Moneyfacts said the difference between the average two-year fixed rate mortgage, and two-year swap rates, had widened from 1.02% in October to 2.84%.
Also, the average two-year tracker mortgage is now 2.6% above Bank Rate, compared to a differential of just 1.29% at the beginning of October, before the four consecutive rate cuts by the Bank of England.
This is in effect a single piece of good news in a sea of troubles and something only a blindly optimistic junior minister would describe as ‘the green shoots of recovery.’ However, for those seeking to find a mortgage and secure a house, this could mean the difference between success and failure.
