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27 July 2008

Nationwide leads in mortgage market

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by Brian Turner

Nationwide forces competition in mortgage market

The Nationwide Building Society continues to lead competition in the mortgage markets, forcing the Halifax and Yorkshire Building Society to reduce mortgage rates last week.

The Abbey, Cheltenham & Gloucester, and Woolwich have all already reduced the cost of their own mortgage products this month.

Despite the UK still experiencing the Credit Crunch, the Nationwide has already pushed to deliver the cheapest mortgage deals in the UK, forcing competitors to react.

At present, Nationwide are currently leading the mortgage sector with a 5.74% tracker with a set-up fee of just £599 – which so far remains the cheapest general home mortgage on the market when arrangement fees are taken into consideration.

While the YBS do offer a 4.99% deal, the arrangement fee is a whopping 3%. While 2.75% of this can be added to the mortgage repayment costs, it simply balloons the mortgage rate to over 7% – hardly competitive.

Nationwide make a point that their offer is only available directly through the company, by-passing mortgage brokers in order to cut out commissions.

While no doubt the already struggling financial services sector will find that unwelcome, at present anything that helps stimulate the mortgage market has to be welcome for consumers.

Additionally, unlike some mortgage lenders, Nationwide is not forcing customers who take out a cheap mortgage to also take out Nationwide’s home insurance policies.

While it may seem as though the Nationwide is leading the mortgage markets at present, there still remains room for further competition.

The worst pitfall for anyone looking for a new mortgage or a remortgage at present are arrangement fees, and having to take out other company products to support the mortgage purchase.

In both instances, consumers need to look really closely at what the deal entails, as mortgage lenders have become pretty slick at trying to focus attention on lower mortgage rates which are subsidised by high fees.

At the end of the day, while the mortgage market is liberalising, there remains room for improvement. Consumers can only hope that other mortgage lenders start to open up more with their mortgage offers, and help bring much needed impetus to an already languishing property market.

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