Halifax and Abbey begin price war

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by Kay Murchie

Halifax and Abbey, the UK’s two largest mortgage lenders, have launched a price war in a bid to tempt new borrowers.

The two lenders are competing on two-year tracker mortgages, which are usually linked to the Bank of England base rate. However, those with a small deposit will lose out as the lenders will only accept homeowners with a large amount of equity or a sizeable deposit.

Abbey has introduced a two-year tracker mortgage at 5.69% that comes with a fee of £1,950 but is only available to borrowers who have a 25% deposit.

Meanwhile, Halifax has cut its rates by 45 percentage points, again only available to borrowers with a large deposit or equity in their home worth 25% of the property’s value.

According to David Doulton of Fairinvestment.co.uk, the price war between the two lenders is a good sign for the slowing housing market.

Those who have a large deposit or enough equity in their home will benefit and it is promising to see the two lenders helping to bring rates down. Hopefully more lenders will do the same, added Mr Doulton.

However, Halifax has no fixed-rate deals for anyone without a minimum 10% deposit. Those who borrow 95% loan-to-value (LTV) from the Halifax could receive a 3-year fixed-rate at 8.04% with a £499 fee, monthly repayments are £1,549 on a £200,000 loan.

In the meantime, there are no deals for 2-year fixed rates above 75% LTV from Abbey. It is just offering one 85% LTV mortgage at 7.09% with a fee of £2,499.

Building societies Cheshire, Newcastle and Skipton have recently announced rate cuts in a bid to encourage more borrowers back to the market.

In related news, figures from Moneyfacts.co.uk have revealed that there are now 71% fewer mortgages available compared with this time last year.

There are now 3,748 mortgage deals available compared with 13,027 mortgage products last August, according to Moneyfacts, showing what an impact the credit crunch has had on the housing market.