Now A&L slashes mortgage rates

Last Modified: 27 Aug 2008
Source: PA News

Alliance & Leicester became the latest lender to slash its mortgage rates as competition continued to return to the market.

The group said it was cutting the cost of all but one of its mortgage products, reducing rates by between 0.1% and 0.55%.

The move continues the recent trend among lenders to pass on reductions in wholesale funding costs to consumers as they once again compete for borrowers.

Like other lenders, A&L's biggest reductions were on fixed rate mortgages, with the group reducing its two-year fixed rate mortgage to 6.69% from 7.24%, for people borrowing 85% of their home's value and paying a £599 fee.

But it is also cutting the cost of its two-year tracker deal by 0.1% to 6.39% for people with a 15% deposit, while the arrangement fee on the loan has been halved from 2% of the sum borrowed to 1%.

A&L spokeswoman Debbie Hughes said: "A number of lenders, including ourselves, are currently able to take advantage of lower money market rates. Lower swap rates have enabled us to reduce the rates on our fixed products."

But like other lenders, A&L continues to demand high deposits from its borrowers. The group will not advance a mortgage to anyone with a deposit of less than 15% of the value of their home, while borrowers need to put down 25% in order to qualify for the group's best rates.

Figures released last week showed that the average cost of a two-year fixed rate mortgage had returned to the level last seen in August last year, before the problems caused by the credit crunch began to impact rates.

Financial information group Moneyfacts said the average rate for one of the deals was 6.59%, only fractionally above an average of 6.56% in August last year, and well down on a level of 7.08% in early July.

But despite the fall in rates, arrangement fees on the deals still remain higher than last year, while lenders continue to demand large deposits in order to secure their best rates.

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