A CHEAP mortgage bonanza could revive the housing market as lenders roll out exceptional deals.
The number of record-low mortgages have boomed since Christmas 2012, with several major lenders launching fixed-rate products with an interest rate below two per cent.
Aaron Strutt, mortgage broker at Trinity Financial, said: “It’s been a great start to 2013 with lenders launching fantastically cheap rates. Many are once-in-a-lifetime deals.”
HSBC is the latest major lender to launch a fixed-rate deal below two per cent.
Its two-year deal at 1.98 per cent is the lowest ever by any lender and will allow a typical household to slash their bill by as much as £230 (GBP) a month or almost £3,000 (GBP) a year.
It means families are reaping the benefits of the Government-backed Funding for Lending scheme launched last summer. The average two-year fixed rate for those with a 25 per cent deposit has dropped from 4.44 per cent to 3.92 per cent, according to comparison site Moneyfacts. So households with a typical £150,000 (GBP) mortgage would pay £785 (GBP) instead of £829 (GBP) – saving £44 (GBP) per month.
There are 308 more home loan deals available since the Bank of England launched the scheme to boost lending by providing lenders up to £60billion of cheap money, according to figures compiled for the Daily Express.
The glut of new deals comes as the Bank’s record low base rate of 0.5 per cent is expected to stay again this week.
Last week the Post Office also launched a new five-year fixed-rate mortgage at just 2.74 per cent.
Other lenders including Lloyds, Nationwide, NatWest, Tesco Bank and Yorkshire Building Society have all cut mortgage rates in the last week in an effort to attract new business and give the housing market a further boost.
HSBC’s two-year fix at 1.98 per cent is for those with a 40 per cent deposit and comes with a fee of £1,499 (GBP).
But many of the best mortgage rates are at building societies. Yorkshire, Chelsea, and Norwich & Peterborough building societies all offer two-year fixes at 1.99 per cent with a fee of £995 (GBP).
A household with a £150,000 (GBP) mortgage on the average standard variable rate of 4.88 per cent could reduce their monthly bill from £866 (GBP) to just £635 (GBP) by switching to a 1.99 per cent fix – a saving of £231 (GBP) a month, or £2,772 (GBP) a year.
The Building Societies Association (BSA), the trade body for mutuals, said their lending was up 30 per cent last year compared with 2011, representing a 22 per cent market share.
The bonanza comes as a run of encouraging housing market data is released.
Mortgage approvals have risen for five months in a row, hitting an 11-month high of 55,785 in December, recent Bank of England (BoE) figures have revealed.
And Nationwide last week said house prices increased 0.5 per cent month-on-month in January after being relatively flat in both December and November.
Richard Sexton, director of e.surv chartered surveyors, said: “The housing market is stirring from a period of slumber. Lenders have been emboldened by the cheaper funds sloshing inside their balance sheets. These early signs bode well for 2013. Confidence is higher and mortgage funds are cheaper.”
First-time buyers (FTB’s), who typically have a smaller deposit, are not left out. The average two-year fixed rate for those with a 10 per cent deposit has fallen from 5.48 per cent to 4.8 per cent, saving someone with a £150,000 mortgage £60 a month.
The Council of Mortgage Lenders (CML) said the number of first-time buyers is at its highest since the financial crisis.
Britain’s biggest mortgage lender, Lloyds Banking Group, has pledged to lend £6.5 Billion (GBP) to first-time buyers this year.
With many economists expecting the Bank rate to stay at 0.5 per cent until 2017, even those on tracker mortgages may benefit from low rates for some time.
Charlotte Nelson at Moneyfacts said: “Since the launch of the Government’s Funding for Lending Scheme the mortgage market has heated up. There is now a more varied choice and rates have fallen.”
Estate agents say the thaw on mortgages should boost the housing market. Brendan Cox, boss at Home Counties estate agents Waterfords, said: “We are optimistic that more houses will come on the market in the next few months as households act on the news of lending conditions and an improved market.”
Ben Thompson, chief at Legal & General Mortgage Club, added: “In the second half of the year house prices should start to climb, reaching their 2007 peak of £227,000 by 2015.”
Source: Daily Express
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