Cheaper Mortgages On Way
Cheaper Mortgages On Way
Mortgage rates could drop below 1.5% as new lenders prepare to enter the UK mortgage market in the coming months.
Increased competition in the UK market could mean that residential property owners benefit from lower mortgage repayments by as much as £600 (GBP) a year
New lenders are likely to be attracted to the UK property market by the availability of cheap loans from the Bank of England and the relaxation of the overly strict mortgage lending criteria.
Financial experts think new lenders will then be in a better position to pass savings on to borrowers than existing high street lenders currently are.
Among those new lenders expected to enter the UK mortgage market later this year are Home & Savings Bank and NBNK.
Economic experts think rates could fall by 0.2% because of these new lenders entering the mortgage market and it is hoped that their entry will bring the renewed appetite for lending from existing banks, including buy-to-let mortgages.
Ian Gordon, a banking analyst at Investec, said: “Would-be new entrants are encouraged by both cheap funding and easier capital requirements. But, perhaps more importantly, the ambitions of the incumbents are changing. Lloyds, for example, plans to swing back into positive net lending in the second half of this year. There are plenty of reasons to believe that some downward pressure on mortgage pricing can be maintained.”
The lowest rate on a two-year tracker mortgage is currently 1.69% offered by Chelsea Building Society, which could potentially drop to 1.49%.
Meanwhile, the best rate on a two-year fixed mortgage loan is 1.7% from the Post Office, which would drop to 1.5%.
A 0.2% drop in mortgage rates would equate to monthly mortgage repayments falling by £50 a month – or £600 (GBP) a year, on an interest-only basis.
Under the Government’s Funding for Lending Scheme (FLS), banks and building societies can borrow from the Bank of England at rates as low as 0.75%.
However, the amount they borrow is directly linked to the amount they must lend to households and businesses.
New entrants to the UK mortgage market can only be good news for all potential borrowers and should be great for property investors as Buy-To-Let mortgage rates are also expected to drop in line with their residential counterparts.