Abbey Mortgage rates reduced
The Abbey has become the second big lender this week to make slight cuts to some of its mortgage rates.
All flexible and tracker rates are being cut by 0.05% while new borrowers with 25% deposits are seeing fixed rate deals being cut by up to 0.17%.
On Tuesday, the Nationwide building society cut some of its fixed rate loans for new borrowers by up to 0.3%.
The Abbey is making the reductions in anticipation of a cut in its own borrowing costs.
It said it hoped to benefit from the Bank of England’s recent plan to lend more money to commercial banks, in the hope of reducing their borrowing costs as measured by the London Inter Bank Offered Rate (Libor).
“Abbey had already decreased rates on its flexible rate and tracker mortgages by 0.10% in response to the Bank of England’s recent cash injection,” said a bank spokesman.
“This additional 0.05% reduction anticipates future falls in Libor rates and will further support the Bank of England’s action in helping to bring liquidity back to the UK mortgage market.”
Rate cuts
The Bank of England has cut its main interest rate three times since the beginning of last December, taking its base rate down to 5%.
However, this has failed to free up lending between banks in the City’s financial markets.
As a result, the cost of some fixed rate mortgages, which hinge directly on inter-bank borrowing costs, has recently been pushed to its highest level for eight years.
According to the Bank of England, the average interest rate on new two-year fixed-rate mortgages, taken by new customers with a 5% deposit, rose to 6.94% in April.
These are the most popular sort of deals at the moment and their cost is now at its highest since February 2000.
By contrast, borrowers with a deposit of at least 25% were being charged much less.
Although the cost of their deals has also risen in the past two months, they were being charged just 6.08% on average for their two-year deals, reflecting the reduced risk these borrowers present to lenders at a time when house prices are falling.
Source: BBC http://news.bbc.co.uk/2/hi/business/7404468.stm