Fixed Rates Falling Further

As each week goes by fixed rates are being trimmed by mortgage lenders, but are trackers still a better bet?

Fixed-rate mortgages have been falling for the past couple of months with a rash of price cuts in July from most of the major lenders. And the last seven days has seen mortgage lenders at it again, trimming a little here and shaving a bit there.

It may not be the end of the credit crunch quite yet, but there is some relief in the recent cuts, particularly as they bring fixed rates more into line with variable deals.

So, who has cut what in the last seven days?

Abbey

The biggest lender to announce cuts this week was Abbey.  Two and three-year fixed rates have been cut by 0.25%, with two-year fixes starting at 5.89% and three-year deals from 5.79% (both with a £995 fee and maximum LTV of 70%).

And Abbey has also made cuts on its range of fixed rates for smaller mortgages. The deals are only available up to £150,000 and come with a fee of £549. The three-year fix has been cut to 6.04% and the five-year fix to 6.29%.

Yorkshire Building Society

One of the lowest fixed rates comes from Yorkshire Building Society, which reduced its two-year fixed rate mortgage from 4.99% to 4.89% and cut the fee from 3% of the loan to 2.5%. This is still a massive fee, but could suit those with larger mortgages who would benefit from the extremely low rate.

For those with more modest mortgages, the lender has launched a new two-year fix at 5.54% with a fee of £895.

Britannia Building Society

Britannia cut its two and five-year fixed rates by up 0.3%, and the deals carry low fees.

For borrowers with a 50% deposit or equity the two-year fix is 5.99% with a fee of £499 or a fee-free deal at 6.34%. The rates rise to 6.39% and 6.69% respectively for customers needing to borrow up to 75%.

There is also a higher fee option at £999, which is still reasonable in the current market. Rates up to 75% LTV are a low 5.64% rising to 6.39% for those borrowing up to 90% LTV.

Nationwide Building Society

Nationwide has announced changes to its mortgage range, cutting rates by up to 0.2% and introducing a new lending tier of 60% loan to value with fixed rates at this level from 5.88%.

Cheshire Building Society

Cheshire Building Society has slashed rates this week by up to 0.5% -- a welcome cut, and a necessary one when you look at the competition.

Two-year fixed rates have been reduced to 6.49% with a fee of £999, or 6.79% for a fee-free remortgage deal.

The three and five-year rates are now 6.49%, and there is a 10-year deal at 6.09%. All three come with a fee of £999.

All of the above mortgages are available up to 80% loan to value.

Skipton Building Society

Skipton has launched two new stepped fixed rate mortgages - both over a five-year term.

`Stepping up' has a rate that starts low (5.39%) and increases slightly each year up to 6.99% in year five. This is aimed at borrowers whose income is set to increase over the next few years, such as graduates.

`Stepping down' is the reverse, starting at 6.99% and gradually reducing to 5.39% in year five. This is particularly useful for those who are financially secure now but may be about to retire or are planning life changes such as children that will leave them with less money.

Both have a fee of £895 and are available to those with a 25% deposit.

Leeds Building Society

Leeds Building Society has just announced it is cutting the rates on its two-year fixed rate mortgages in its new range, on both fee-paying and fee-free options.

The fee-paying option has been cut from 5.75% to 5.25% -- a great rate but it comes with a high fee of 3%, and it is only available on mortgages up to £250,000. 

Newcastle Building Society

Last but not least is Newcastle Building Society, which has launched 20 new mortgage products including a number of extremely competitive deals.

If you want a fixed rate you won't find much better than its two-year deal at 5.65% with a fee of £999. It's available up to 75% loan to value.

Or if you are happy fixing for longer its five-year rate of 5.6% comes with the same fee and LTV requirements.

Time to fix?

So, after months of banging on about how trackers and discounts are much better options for many borrowers than overpriced fixed rates, have I now changed my mind?

Not yet.

I still think on average a tracker represents better value for money when you balance fees, rate, and the fact that the deals with no tie-ins save you from making a commitment in a volatile market.

Inflation is now at 4.4% and some economists suggest it will come down before the end of the year (and when it does the Bank will be able to cut Base Rate). I agree and believe interest rates will come down even further in 2009.

Those on variable rates will benefit from these falls while those who have fixed will not. Of course, in return they get security and protection from the risk of rates increasing.

If it's a tracker you are after, here are five of the best:

         Big deposit: Woolwich lifetime tracker, 5.69%, fee of £995, up to 60% LTV

         Small deposit: HSBC lifetime tracker, 5.79%, fee of £599, up to 90% LTV

         Low fee: Market Harborough lifetime discount, 5.95%, fee of £295, up to 75% LTV

         Low rate: HSBC two-year discount, 4.99%, fee of £2,499, up to 80% LTV

         All-rounder: Nationwide three-year tracker, 5.74%, fee of £599, up to 75% LTV