Flurry of lenders launch best buy mortgages

Mortgage rates are continuing to fall as banks and building societies loosen their lending criteria and compete for business, research showed today.

The average cost of fixed rate and tracker deals has fallen steadily since the beginning of the year, with a flurry of lenders launching best buy rates this week.

But more significantly more than 300 new mortgage products have been launched since the beginning of the year, leading to a 26 per cent jump in the number of different deals available for people with only a 10 per cent deposit, according Moneyfacts.co.uk.

The group said the rise in availability of mortgages for people with only small deposits showed lenders were feeling increasingly confident about the housing market following 12 months' of price rises.

It added that the launch of the new best buy rates suggested they were also trying to tempt homeowners to remortgage away from the standard variable rates (SVRs) that many people have been sitting on since their last mortgage deal ended.

Eight mortgage lenders have increased their SVR for at least for some customers since the Bank of England base rate was last changed in March 2009, with Skipton hiking its by 1.45 per cent.

Commentators have predicted other lenders will suit and raise their SVRs, further increasing the impetus for people to remortgage.

Darren Cook, spokesman for Moneyfacts, said: "Moneyfacts research shows that more competitive rates are now being made available to mortgage brokers.

"An improved broker market paired with recent cuts in some rates to direct customer could indicate that lenders are opening their doors just a little wider and trying to compete for business.

"Previously, there has been little or no motivation for people to remortgage, but as standard variable rates continue to rise, many will be forced to find a better deal elsewhere and lenders may now be wise to this."

The average cost of a two-year fixed rate mortgage has dropped from 4.88 per cent at the beginning of January to 4.81 per cent today, while rates charged on five-year deals have gone down by 0.09 per cent to 6 per cent, following a reduction of around 0.25 per cent in swap rates, upon which the deals are partially based.

There has been an even larger fall in average tracker rates, which have remained broadly static since April last year, with these dropping by 0.1 per cent to 3.67 per cent.

Among the big names that have launched new rates this week are Santander, Lloyds Banking Group's lending arm Cheltenham & Gloucester and internet bank first direct.

Santander launched a new two-year fixed rate mortgage with a rate of 3.44 per cent for people with at least a 30 per cent deposit who paid a £995 fee, and a two-year tracker for a similar borrower of 2.49 per cent.

Both rates, which are also available through Alliance & Leicester, took the second spot in the best buy tables.

Leeds Building Society also launched a five-year fixed rate deal of 4.7 per cent for people borrowing up to 60 per cent of their home's value who paid a £999 fee, which went straight to the top of the best buy tables, while first direct launched a market leading offset tracker rate of 2.39 per cent.

The overall number of mortgage products available has increased by 20 per cent since the beginning of the year, including a 26 per cent rise in the number of deals available for people with only a 10 per cent deposit and rises of 19 per cent and 48 per cent for people borrowing 85 per cent and 80 per cent respectively of thier home's value.

Ray Boulger, senior technical manager at John Charcol, said: "It's a continuation of the trend we have seen for the last three or four months, none of the cuts have ben massive, with lenders cutting a few selected rates rather than all of their rates.

"The reason for the trend is due to a bit more competition in the market. We will see a bit more activity in the market this year."