Abbey slashes mortgage rates

Abbey has become the latest lender to slash its mortgage rates as competition continued to return to the market.

The group is cutting rates on its two, three and five-year fixed-rate loans by up to 0.3%.

It is also reducing the cost of mortgages in its large loans range, aimed at people borrowing between £550,000 and £5 million, by up to 0.35%.

The changes, which take effect from Friday, will leave a two-year fixed-rate mortgage for someone with a 25% deposit costing 5.79%.

The move comes the day after Lloyds TSB announced it was cutting its mortgage rates for the fifth time in a month, reducing its two, three, five and seven-year fixed-rate deals by up to 0.11% for people with at least a 25% deposit.

The latest round of cuts are a further sign that competition is returning to the mortgage market following the problems caused by the credit crunch.

Financial information group Moneyfacts.co.uk said earlier this week that the cost of a two-year fixed-rate mortgage has returned to its pre-credit crunch level as a result of the most prolonged period of cuts since the crisis began.

The average rate for a two-year fixed rate loan is now 6.39%, around the same level as before the credit crunch first surfaced in July last year, although the Bank of England base rate was 0.75% higher then.

Rates on the popular two-year deals peaked at 7.08% at the beginning of July but have come down steadily since then, following cuts in wholesale funding costs.

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