Mortgage Lenders Cut Rates

A swathe of mortgage lenders have cut their rates in the past week, indicating the mortgage rate war that has taken place during the past few months has some way to go yet.

And in the battle for the Best UK Mortgage Rate, building societies seem to be coming out on top, according to shared equity loan provider Castle Trust.

According to Castle Trust, building societies are offering over three quarters of the current top 40 best buy mortgages, with 33 of the cheapest 40 products currently being offered by mutuals.

It also shows the average rates across all building society best buy mortgages – fixed, variable and buy-to-let - are currently 3.26 per cent compared with 6.2 per cent in 2008 and lower than the 3.81 per cent in October 2012, when the Government's Funding for Lending scheme, which provides cheap funding to lenders as long as they promise to increase lending, started to take effect.

At the end of last month, Yorkshire Building Society launched the mortgage market's lowest ever five-year fixed rate deal at 2.59 per cent. It comes with a £1,345 fee and is available to those with a 40 per cent deposit and those who deal directly with the lender via its branches or over the phone.

Yorkshire's sister lender, Chelsea Building Society, has also been active in cutting its rates in recent weeks, the most notable cuts in the five-year fixed area. It is know offering a 75 per cent LTV five-year deal at 2.84 per cent with a £1,545 fee but, once again, it is only available to borrowers who deal directly with the lender and not via brokers.

Another deal available only directly with the lender, is Tesco Bank's 1.99 per cent two-year fixed rate deal which was relaunched earlier this week. It comes with a £1,600 arrangement fee and a non-refundable booking fee of £195.

It may be tempting to think all of the best deals are being kept from brokers. While there are some cheap rates available direct with the lender, it is not always simple to apply by yourself.

Lenders are more conservative than they used to be and this means they are being more picky about who they lend to these days. Using a broker increases your chance of being accepted as they understand the lender's criteria very well, having to work with them on a daily basis. In the vast majority of cases borrowers are better off using a broker than applying direct to the lender.

While direct-only lenders have been busy cutting rates recently, so have lenders which deal through mortgage brokers.

Abbey for Intermediaries, the broker arm of Santander, recently cut rates by up to 0.55% across its residential and buy-to-let ranges and Virgin Money has cut rates by up to 0.46%.

Abbey is now offering a two-year fixed rate at 3.24 per cent up to 80 per cent LTV, with a £995, as well as a 2.29 per cent fixed rate up to 60 per cent LTV with a £1,495 fee.

Virgin is now offering a three-year fixed rate up to 75 per cent LTV at 2.79 per cent with a £995 as well as a base plus 2.29 per cent three-year tracker for the same deposit.

But remember, rates are not everything in the current environment as some lenders have chosen to offset cheaper rates with higher arrangement fees. And if you decide to roll these fees into the mortgage, then you will be charged on your loan and the fees.

To ensure you are getting the best deal then consult a mortgage broker.