Mortgage rates fall for some

Mortgage rates continued to fall during September for homeowners who had large deposits, new figures showed.

The average cost of a two-year fixed-rate mortgage for someone borrowing 75% of their home's value dropped from 6.08% to 5.93% during the month to reach its lowest level since March, according to the Bank of England.

Five-year fixed-rate deals for people with a 25% deposit fell by 0.25% to also reach a six-month low of 5.84%, while tracker deals for this loan-to-value (LTV) ratio dropped by 0.6% to average 6.14%.

But the news was less good for people with just a 5% deposit, with the cost of five-year fixed-rate deals for these borrowers remaining unchanged.

For the fifth month running, there were not enough two-year fixed-rate mortgages for a 95% LTV to be included in the figures.

Financial information group Moneyfacts.co.uk said there were now just 43 different fixed-rate mortgages for people with only a 5% deposit and 18 discount or variable ones, down from 1,079 in July last year, before the credit crunch first struck.

Mortgage rates were falling throughout most of September, helping to push the average cost of a two-year fixed-rate deal back to its pre-credit crunch level.

But towards the end of the month, lenders began to hike their rates again in response to jumps in wholesale funding costs due to the latest round of global financial turmoil.

This trend could be reversed by Wednesday's 0.5% cut in the Bank of England base rate to 4.5%.

A handful of lenders have so far said they will pass on the reduction in full, including Britain's biggest mortgage lender Halifax, Lloyds TSB and Cheltenham & Gloucester, Barclays' mortgage arm the Woolwich and NatWest and Royal Bank of Scotland.

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