The gloves are off in a fixed-rate mortgage war after the two cheapest two-year and five-year fixes came on to the market at the weekend – while another new product was also launched, claiming the title of the lowest tracker in the market. More such deals are likely, the Mortgage Advice Bureau forecast.
Chelsea Building Society launched a direct-only two-year fixed rate at 1.89%, available at 60% LTV with £1,695 fee.
First Direct launched a five-year fix at 2.69% available at up to 65% LTV with a £1,999 booking fee. It is the lowest five-year fix on record.
Chelsea product manager Sunjeev Sahota said: “There has been a great deal of movement within the mortgage market recently and we are making sure customers benefit by keeping our wide range of mortgages as competitive as possible. In particular, our 1.89% product will be the lowest two-year fixed rate available anywhere in the market.”
First Direct head of retail products Andy Forbes said: “Over the last month we have seen borrower appetites increase for longer-term fixed rate mortgage deals. In response to this demand we have reviewed our offers to ensure that we continue to give our customers access to the most competitive rates available.”
There are now 16 lenders offering mortgages at under 3% and five or six at under 2% –provided the borrower can put down a chunky deposit. They include the Post Office which last week launched a five-year fix at 2.74% available a 60% LTV.
Meanwhile, ING Direct has launched a two-year tracker mortgage at 1.94% available up to 60% LTV.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “For new and existing home owners, the fixed rate price war is brilliant news.
“In the past, borrowers have effectively had to pay a premium for the benefit of security that fixed rates provide. But healthy competition and incentivised lending means that is no longer the case, and with lenders looking to increase their lending volumes in 2013, I am sure we will see even greater competition and therefore even more favourable deals appearing in the weeks ahead.”
Andrew Montlake of mortgage brokers Coreco said: “As competition among lenders intensifies, they will start moving up the risk scale, and we will see more 85%, 90% and even some 95% deals coming out.
“For first-time buyers, it is a matter of waiting and then there will be more choice for them.”
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