Halifax joins mortgage price war

Lloyds Banking Group, Trinity Road, Halifax.
Lloyds Banking Group, Trinity Road, Halifax.

A fresh mortgage price war has broken out with a string of major lenders includng the Halifax bank slashing their rates in recent days.

Metro Bank, Halifax, Barclays, Nationwide Building Society, HSBC, Virgin Money, Skipton Building Society and Norwich and Peterborough Building Society are among those who have sharpened up their ranges.

Halifax is part of the Lloyds Banking group and employs 6,000 people in Calderdale.

The tussle for homeowners’ business has seen several lenders once again drop their rates below three per cent for people looking for a five-year fixed rate mortgage.

Meanwhile, Virgin Money has taken the unusual step of launching a new range which allows people to fix in for one year longer than the usual five-year deals and protect themselves against the prospect of interest rates rising for a prolonged period.

Metro Bank also slashed its five-year fixed rates today. The new products, which carry a fee of £999, include a five-year fix at 2.99% for someone with a 40% deposit and one at 3.79% for a borrower with a 15% deposit to put down.

The announcements came as Norwich and Peterborough Building Society unveiled a 0.20% interest rate reduction on first-time buyer deals.

Moneyfacts said new deals of note also include a 3.84% two-year fix from Halifax for people with a 15% deposit with a £265 fee. A month ago, the rate was 4.14%. It also highlighted a two-year fix from Woolwich for people with a 30% deposit.

The mortgage battle may seem surprising as it comes at a time when speculation has been mounting over the prospect of the Bank of England base rate moving off its historic 0.5% low, pushing up costs for borrowers.

Minutes released by the Bank today showed that its Monetary Policy Committee (MPC) has been split over interest rate policy for two months in a row.

But David Hollingworth, head of communications at London and Country Mortgages, said that swap rates, which lenders use to price their loans, have been on a downward path.

He said: “Swap rates have been falling back and it seems the markets feel it’s going to be too soon for the base rate to rise before the end of this year now.

“So you’ve got slightly reduced funding costs for lenders going into the autumn, when traditionally, you see lenders trying to come back strongly into the market.”

He suggested that some businesses may be trying to meet end-of-year lending targets, and so will be dropping their rates now to encourage new applications, which will take a while to process.

Mr Hollingworth also suggested the “improved appetite” for lending has been amplified by lenders now having got to grips with new, stricter mortgage lending rules which came into force at the end of April.

The market saw some disruption earlier this year as lenders’ systems adjusted to the new rules, which force them to probe mortgage applicants in more detail about their borrowing habits. The number of mortgage approvals dipped around that time before heading back upwards.