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Wednesday 10th March 2010
Interest on fixed rate loans drops
The interest charged on two-year fixed rate mortgages fell to a six-and-a-half-year low during February in a further sign that competition was slowly returning to the market, figures have shown.
The average cost of a two-year loan dropped to 3.88% during the month, down from 3.97% in January, to stand at its lowest level since July 2003, according to the Bank of England.
There was also a fall in the average cost of a five-year fixed rate mortgage, with this dropping to 5.49% from 5.56%, while tracker rates increased slightly to 3.69%, although they remained at their second lowest level since records began in 1997.
A number of banks and building societies cut their rates during February, with many launching new best-buy deals in a bid to tempt borrowers to remortgage away from their lenders' standard variable rates.
There was also a big increase in the number of products available for people with only small deposits, as lenders became more comfortable with the risk these borrowers represented.
The number of different mortgage products available also broke through the 2,000 barrier for the first time in more than a year during the month.
But despite the improvement in mortgage rates, the cost of unsecured borrowing increased or remained the same during February.
The average rate charged on a credit card rose to 16.51%, up from 16.37% in January.
A spokeswoman said: "The changes are in response to very strong demand for our mortgages over recent weeks.
"It is important for us to preserve a controlled level of business that ensures we meet our desired levels of service."
Source: Press Association