Mortgage rates returning to pre credit crunch levels

Michelle Slade from Moneyfacts says that "the average rate is a good indication of what is going on in the market, but what is more telling is what the largest lenders have done with their rates, as the top ten lenders make up 77.2% of the mortgage market."

All the main lenders have cut their two year fixed rates since the peak of early July 2008, with the exception of Northern Rock which has put up its rate by 0.01%, as well as increasing its arrangement fee by £500. The biggest cut comes from the Halifax where the rate has gone from 7.27% to 5.99%, as of the start of this week. Although Halifax now offers one of the best rates it has a high arrangement fee relative to its competitors.

Bradford & Bingley and Cheltenham and Gloucester have also passed on significant cuts, but this has been offset slightly by an increase in their average fees

Michelle goes on to say that "the cost to lenders in obtaining the funds for mortgages on the money markets has dropped significantly in the last few months and we are now seeing some relief for borrowers who are looking for a new deal. The increase in borrowers monthly repayments should not be as much as it would have been had they remortgaged two months ago, which will hopefully mean more borrowers can afford to remain in their homes.

“I doubt we will see rates being cut to levels similar to when base rate was last at 5%, but we should hopefully see further cuts from the big lenders in the coming months. Only time will tell if we have finally turned a corner, but this is the most prolonged period of cuts we have seen since the credit crunch began.”