A silver lining

 

Mortgage rates have dropped to their lowest for almost seven years, as lenders start to offer cheaper home loans for those with smaller deposits.

The average rate on a two-year fixed rate mortgage is now 4.52%, the lowest since September 2003, and compares with over 7% two years ago. At the start of this year, the average was 4.93%. The cost of five-year fixed rate mortgages has also improved, falling from 6.09% in January this year to 5.61%.

Michelle Slade of Moneyfacts said: "The market has been set for the mortgage market to return to some sort of normality, while still applying the lessons learnt over the last few years."

The number of mortgage products is also up at 2,635 compared with 1,601 six months ago. The biggest rise in availability is in mortgages for borrowers with only 15% or 20% deposits. The number of mortgages for people borrowing 80% LTV has more than doubled since the start of the year, bouncing up from 153 to 318.

Among lenders slashing rates is Barclays which tomorrow will cut its rates on its highest LTV fixed rate Woolwich products by up to 0.70%.

This follows the announcement earlier this month that Barclays is offering competitively priced mortgages at 90% lending for customers buying a new Bovis Homes property.

The key reductions this week on the Woolwich products include a cut of 0.70% on a two-year fixed rate mortgage (up to 80% LTV) from 5.29% to 4.59%, and a reduction of 0.60% on a three-year fixed rate (up to 80% LTV) from 5.49% to 4.89%.