Cheaper Mortgage Deals hot up, report London's local mortgage broker, London Mortgage Advice Ltd Thursday, 14th January 2010

The return of competition in the mortgage market is hotting up as lenders are wooing borrowers with cheaper deals.

Figures release by The Bank of England show a marginal fall in the cost of the average two-year fixed-rate deal for borrowers with a 25 per cent deposit. Rates fell 0.04 per cent during December to 4.06 per cent, the lowest level since May last year. The cost of five-year deals has also fallen in the last month.

According to the Bank of England there is increased competition in the fixed-rate mortgage market during December, following a steep rise in borrowing costs earlier in the year. In the summer mortgage rates climbed rapidly to reflect a sharp rise in swap rates, the wholesale moneymarkets, which lenders partly use to fund new mortgage lending. The average two-year fixed rate was 4.47 per cent in September. Most major lenders cut the interest they charged on fixed-rate mortgages in December, particularly for people borrowing a higher proportion of the value of their home, such as first time buyers.

One lender is cutting its base-rate trackers by up to half a point and introducing a new deal for borrowers with a ten per cent deposit. It will charge 4.99 per cent for a two-year tracker worth up to 90 per cent of a properties value, with a £995 fee.

While another lender cut its fix and tracker deals by up to 0.6 percentage points yesterday. It is offering a two-year fixed-rate deal available up to 75 per cent of a properties value with a rate of 3.79 per cent.

London Mortgage Advice welcomes the flurry of interest rate changes as lenders battle to top the tables for the most competitive deals.