We are in the middle of a “high-street mortgage war”, reports the Financial Times. Headline mortgages currently being offered include a five-year fixed rate at 2.79% with the Co-operative Bank, whilst those looking for a short term mortgage might be attracted by a two-year fixed rate at 1.99 % with Santander.Why are the lenders slashing their rates all of a sudden? The main reason is that the interbank funding rates have fallen recently, this is the rate at which financial institutions borrow from and lend to each other. The credit for that is being given to the Bank of England’s Funding for Lending Scheme, which is pumping money into the banking system. That is at least part of the reason why mortgage lending rose some 14% between September and October, and is predicted to hit £144bn for 2012.
Between July and September ten thousand first-time buyers took out mortgages on London properties, says the Council of Mortgage Lenders – the highest number during a single three-month period for almost three years. But don’t be fooled by the headlines into thinking it’s easy to bag one of these cheap deals.