Signs that Funding for Lending working as lenders cut rates


Good news for borrowers everywhere – even those on higher loan-to-values (LTVs) – as several lenders have cut their mortgage rates this week, and others look set to follow suit. Swap rates – the rate lenders pay to borrow from each other – continue to fall to new lows as the Funding for Lending scheme starts to have an impact, with lenders able to borrow at rock-bottom rates.

Accord launched a ten-day sale earlier this week, including a five-year fix pegged at just 3.29 per cent for those with a 30 per cent deposit. HSBC has reduced its two, five and seven-year fixes by up to 20 basis points, while even one of the supermarkets has launched a five-year fix pegged at 3.19 per cent for those with a 40 per cent deposit. Nationwide has cut several fixes and trackers by up to 40bps, while Abbey for Intermediaries is cutting a number of two-year fixes by 10bps. ING Direct may be about to be swallowed up by Barclays but it is also cutting its rates this week on two and five-year fixes by up to 75bps.

The best rates are still available for those with the biggest deposits or similar levels of equity in their homes but the good news is that rates are falling on higher LTVs too, although you should still expect to pay a premium for the lender’s perceived added risk. What is less encouraging is the raising of Santander’s standard variable rate (SVR), which takes effect from this month and means that some borrowers are facing higher mortgage payments. Speak to an independent mortgage broker if you find yourself in this position to check whether you could remortgage to a more competitive deal.

The other ‘losers’ are those requiring interest-only loans with Nationwide no longer offering this option to new customers. However, while other lenders have tightened their interest-only offerings, the private banks remain committed to interest-only lending and nearly all of the deals we place with them are on this basis. Talk to us if you require interest only to find out what options are available to you.

Jonathan Harris
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Jonathan Harris