Fixed mortgage deals get even cheaper

Lenders have launched over a dozen new fixed rate mortgages in the last seven days.

The last week has been a busy one for mortgage lenders, with many announcing new deals or cutting their rates.

Some may be only just reacting to last month's Base Rate cut, but it's more likely they are pricing in a rate cut expected at lunchtime today. Either way, it is good news for borrowers, and the vast majority of recent announcements have been in the fixed rate sector.

Nobody is pretending that mortgages are easy to come by for all borrowers, or that they are competitively priced for anyone but those with big deposits, but things are getting better and prices are at least moving in the right direction.

Combined with the news last week that a handful of lenders have pledged significant lending sums in the next two years, there is at least something for borrowers to raise a small smile about. And when I say significant sums of lending, I mean by today's standards -- the £14bn Northern Rock has pledged over the next two years is dwarfed by the £29 billion it lent in 2007 alone. Still, it's better than nothing.

So, who has announced what?

The movers and shakers 

The country's largest building society, Nationwide, has come out with a new five-year fixed rate at under 5%. The 4.98% rate is for those with a chunky 40% deposit. It rises to 5.18% for those borrowing with just 25% upfront. These are decent deals but by no means market leading as the tables below show.

Note that Nationwide will increase its maximum loan-to-value to 95% for existing borrowers. Its rates increase of course, but it gives borrowers the option of a fixed rate instead of simply reverting to the lender's standard variable rate (called its Base Mortgage Rate) at 3%.

Santander subsidiaries

Alliance & Leicester has reduced its two, three and five-year fixed rates and cut its arrangement fees by up to £300.

Plus it has launched a brand new two-year fix starting at 3.84% (up to 60% LTV) with a £995 fee. It is a competitive rate, but not market leading (see table below).

At 75% LTV the lender now offers a range of two, three and five year deals with fees from just £299.

Sister lender Abbey has cut rates on its two and three-year fixes and launched more 'no-fee deals' for borrowers who are willing to accept a slightly higher rate for no upfront cost.

Abbey's fee-free deals include a three-year fix at 4.59% up to 75% LTV.

Building societies best buys 

Yorkshire Building Society has cut its fixed-rate mortgages at the 60% and 75% tier levels and now offers some market leading products, particularly in the 75% LTV tier.

It offers two, three, and five-year deals available in both offset and non-offset formats with prices varying from 3.79% fixed for the two-year deal (see table), to 4.59% fixed for a five-year mortgage.

Britannia has slashed its fixed rate mortgages by up to 95 basis points in some cases, and has a very tempting five-year fixed rate indeed, at 4.24% with a fee of £999 (up to 60% LTV).

Best of the bunch 

But my favourite fixed rate of those launched last week is the First Direct two-year fixed rate offset mortgage at 2.99% with a fee of £898, available up to 75% -- a market leader.

Note that HSBC has a two-year fix at 2.89% but the fee is £1,499 and it's only available to those with a 40% deposit.

Below are my favourite two-year and five-year deals.  Two-year fixes have long been popular with UK borrowers but five year deals are starting to look really competitive. Not only do you save on remortgage costs two years down the line, you also get the luxury of not worrying about interest rate movements until 2014. And with rates like Britannia's 4.24% deal mentioned above and HSBC's sub-4% rate (in the table below), locking into a five-year deal is starting to look very appealing.

But, and there is always a but, if the Bank of England reduces Base Rate to 0.5% today, mortgage rates could drop even further (though there are no guarantees).

Two year fixed rates

Five year fixed rates

Notes: In each table I have listed a range of LTV tiers from 60% to 90% to suit most borrowers and I have only included deals with fees under £1,000. If you are willing to pay a higher fee you might find you can access cheaper rates. This may suit you if you have a large mortgage, or if you have a large upfront sum of money but a modest income. 

Compare mortgages at lovemoney.com

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