A price war has begun in the mortgage market, forcing down rates across a range of products.
However, deposits required to secure the lowest rates are significant.
Tesco Bank set the bar very low by reducing one two-year fixed rate mortgage at a competitive 1.99 per cent, down from 2.64 per cent, although borrowers require a hefty 40 per cent deposit to secure the deal.
For those with a 30 per cent deposit the supermarket giant has reduced for a two year fixed rated from 2.79 per cent to 2.39 per cent.
Both products carry fees of £995 and are available to customers buying a new home or looking to remortgage.
HSBC is also getting in on the action, reducing its two-year 60 per cent loan-to-value to 2.44 per cent with a £1,499 fee.
At the Co-operative Bank a market-leading rate was announced for those with a 10 per cent deposit; a two year fixed rate at 3.99 per cent with no arrangement or valuation fees.
The bank has pledged to lend £360 million to first-time buyers by the end of the year.
The government’s Funding for Lending scheme (FLS) has been credited for driving prices down, making loans more easily accessible.
The Bank of England and HM Treasury began the FLS on August 1, designed to incentivise banks and building societies to boost their lending to UK households and non-financial companies by providing them with funding for an extended period at below current elevated market rates.
A total of £60 billion has been made available to banks for the first phase of the scheme.
The improved conditions for banks appear to be filtering down to the consumer but its early days to see the full impact of the scheme, according to a representative of the Council of Mortgage Lenders.
“The early signs are encouraging and the intention of Funding for Lending was clearly to make borrowing cheaper but we have a long way to go to see the full affects”, said Bernard Clarke, spokesperson for the CML.
“We would hope to see an overall reduction in borrowing costs as time goes on.”
Other banks to reduce their rates include ING Direct, recently acquired by Barclays, who cut its two and five year fixed-rate deals by up to 0.75 per cent.
Nationwide Building Society has cut its rates, including reducing its two year fixed rate product with a 30 per cent deposit, to 3.09 per cent.
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