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Last Modified: 03 Sep 2008
Source: PA News

Lloyds TSB has cut its mortgage rates for the fifth time in a month as Skipton Building Society announced it was re-entering the first-time buyer market.

The bank, which lends under the Lloyds TSB and Cheltenham & Gloucester brands, is reducing its two, three, five and seven-year fixed-rate deals by up to 0.11%.

But the move will only apply to people with at least a 25% deposit, with rates for people borrowing more than 75% of their property's value remaining unchanged.

Following the reduction, a two-year fixed rate mortgage for someone with a 40% deposit who pays a £1,995 arrangement fee will be 5.54%.

The change continues the current trend among lenders to reduce their mortgage rates following falls in the cost of wholesale funding.

Financial information group Moneyfacts.co.uk said that the cost of a two-year fixed-rate mortgage has returned to its pre-credit crunch level following 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.

Meanwhile in a further sign that the market is continuing to improve, Skipton Building Society said it was re-entering the 95% mortgage market for first-time buyers.

Lenders have been demanding increasingly high deposits from borrowers since the credit crunch hit, with the number of 95% deals shrinking from 1,079 just over a year ago to only 99 now.

But while Skipton is prepared to advance funding to people with just a 5% deposit, they will only do so on the condition that a relative holds savings worth at least 20% of the property's value with it.

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