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House prices rise as mortgage rates tumble

Lenders are embarking on something of a mortgage price war - which should cushion the blow for buyers as house prices soar to record levels. Our consumer journalist Christine Toner takes a look at the mortgage rates and deals...

mortgage rates

Rising house prices

If you’ve yet to get on the property ladder or you’re trying to move up it, you probably weren’t exactly overjoyed to read the latest stats from Rightmove, which show the average house price in the UK is now a massive £313,000.

According to the figures, prices rose in every single region in the UK month on month except London (but, really, how much higher could they go?!) with some regions seeing hikes as big as 2.5% and Wales seeing prices soar by 7.6%.

But before you resign yourself to a lifetime of renting and start questioning how old is too old when it comes to house shares, there is some good news for homeowners to cling to. While house prices might be climbing, mortgage rates are starting to fall. In fact, buyers – and borrowers – could be in for some significant savings as some of the UK’s biggest mortgage lenders embark on something of a price war.

Some of the lowest deals

With interest rates still so low, lenders are taking their rates to unseen before levels to entice borrowers. Banking giant Santander threw down the gauntlet to the competition earlier this month by launching a two year fixed tracker mortgage at just 1.14%. And that’s not even the lowest on offer. Yorkshire Building Society currently has a two-year tracker at 0.89%. Meanwhile Atom Bank was forced to pull its show-stopping five year fix at 1.29% after just seven days as a result of unprecedented demand.

“Lenders have a huge appetite for new borrowers and this is clearly shown in the extent of the mortgage rate war, which is no doubt great news for anyone looking for a mortgage,” says Rachel Springall, finance expert at Moneyfacts.

“There has been a distinct drop in the rates on offer for borrowers with a 40% deposit or equity in particular, as these borrowers are seen as less risky and it’s easier to calculate a market-leading rate.

“New players are also eyeing up this market and are attempting to grab both the attention and trust of consumers, such as Atom Bank.”

What if you don’t have a 40% deposit?

These show stopping rates will require you to have a pretty sizeable deposit (of at least 40%) but if you’re short on upfront cash don’t despair. Rates at the higher loan-to-value (LTV) end of the market are also pretty impressive.

HSBC is currently offering a two-year fix at a rate of 1.99% up to 90% LTV while Nationwide has a two year tracker at 2.24%.

It’s important to remember of course that the initial rate is just that – it will go up (possibly considerably) at the end of the term. The most important figure to look out for when comparing mortgages is the APRC (Annual Percentage Rate of Change to give it its full title) as this will take into account fees and other charges.

It’s certainly a good time for borrowers. Let the price war commence!

To speak to an expert about the best mortgage rates out there call 0800 073 2326 and let our experts at L&C talk you through your options




The Home Owners Alliance Mortgage Service is provided by London& Country Mortgages (L&C), Beazer House, Lower Bristol Road, Bath, BA23BA. London & Country are authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy toLet mortgages.

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