More mortgage cuts for British borrowers

Barclays, Halifax and Nationwide all cut their loan rates for homebuyers and movers.

With the Bank of England's base rate stuck at 0.5% a year since March 2009, the past three years have seen the lowest mortgage rates on record. 

Even so, thanks to market stress caused by the euro-zone crisis, mortgage rates have been creeping up this year, especially for fixed-rate loans. Recently, with funding costs now starting to fall back, lenders are rushing to lower their rates. Some loans look extremely cheap when compared to rates five or six years ago. 

In the past couple of days, three major UK lenders have announced rate reductions, while revamping their loan ranges. Here they are: 

1.Barclays

On Wednesday (24 July), Barclays cut rates for six of its fixed-rate mortgages by up to 0.3 percentage points. It also launched a market-leading fixed rate of 3.29% a year for two years, with no application fee for homebuyers armed with at least a 30% deposit or existing equity. 

Barclays' new range includes a five-year fix at 3.99% (minimum deposit of 30%), another five-year fix at 4.29% (20% deposit) and a two-year fix at 3.09% (40% deposit). All come with a £999 application fee, reduced to £499 for Barclays customers who qualify for loyalty loans.

2.Halifax

Halifax -- once the world's biggest building society and now part of Lloyds Banking Group -- has also cut rates for home movers and first-time buyers (FTBs), with effect from Thursday, 25 July. 

First, Halifax has reintroduced its two-year fixed rate of 6.29% for movers and FTBs with at least a 10% deposit. Also, two-year fixes for similar customers with 20% deposits are being cut by 0.2% to 4.59%. 

In addition, Halifax has launched tracker mortgages of 4.49% for 20% deposits and 4.89% for 15% deposits.

3.Nationwide BS

The UK's building society has taken a knife to its mortgage range, sharpening its product offerings across the board. From Wednesday, rates for fixed and tracker mortgages fell by as much as 0.4 percentage points. These new rates include: 

- a five-year fix at 3.39% (30% deposit required);

- a four-year 'Flexclusive' fix at 3.49% (30% deposit) with low fees;

- a three-year fix at 3.29% (30% deposit); and

- a two-year fix at 2.99% (40% deposit). 

In addition, all Nationwide's tracker rates for two and three years are cut by 0.1%.

One big problem for buyers

In addition to these latest rate cuts, leading lenders and global mega-banks HSBC and Santander have both launched their cheapest-ever five-year fixes at 2.99%. 

Indeed, thanks to the ultra-low base rate and a fallback in swap rates, a range of cheap fixed-rate mortgages are now available at rates below 3% a year. In historical terms, this is fantastically, incredibly, unbelievably cheap. 

Alas, these ultra-low, sub-3% rates are not available to all homebuyers, as they require deposits (or existing equity) of 25% to 40% of purchase prices. For first-time buyers and movers with mere 10% deposits, the best rates on offer almost double, taking them close to 6% a year. 

What's more, most headline-grabbing rates come with steep charges attached. Arrangement fees often exceed £1,000 or even £1,500 for these bargain-basement rates. 

In summary, there are dozens of great rates out there today, but lenders restrict availability by cherry-picking only the best, lowest-risk borrowers. 

Thus, until lenders relax their rules and lending levels start rising to healthier levels, the future still looks gloomy for the UK housing market and property prices! 

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