22
Aug
Mortgage rates 'at 2007 levels'
There are signs the mortgage market is recovering from the credit
crunch Mortgage rates are back to where they were in August 2007 at
the onset of the credit crunch, according to research by price
comparison website Moneyfacts. The average rate on a two-year fixed
deal is now 6.59% - almost the same as 6.56% in August 2007 and
down from 7.08% in early July. However, the costs associated with
mortgages remain high, Moneyfacts said. The better rates are only
available to those with big deposits and lenders are also charging
higher fees. Moneyfacts said that the average mortgage arrangement
fee was now £964 compared with £803 in August 2007.
Furthermore, there is less competition in the marketplace, with
only 3,748 products on offer compared with 13,027 in August 2007.
Borrowers are also required to put down much higher deposits than a
year ago. An average of 20% is now the norm, Moneyfacts says. "The
pricing is getting back to where we were a year ago, but the
appetite for lending is diminished," said Darren Cook, a spokesman
for Moneyfacts. Better margins While the rates are at similar
levels, banks are potentially making more profits on mortgages than
a year ago. Official interest rates, on which fixed mortgage rates
are indirectly based, are now 5% compared with 5.75% in August
2007, which means lenders are getting better returns on the
products offered. Last summer 33 lenders were offering borrowers
100% mortgages compared with just two lenders in August this year.
Abbey, Nationwide and HBOS have been among the lenders that have
been cutting their rates. Lending to homeowners has slumped
dramatically in 2008, because the credit crunch has dried up the
supply of funds available to banks.