According to experts, the housing market could be getting a boost thanks to Northern Rock, which slashed its mortgage rates on Tuesday, The Independent has reported. Woolwich, which is owned by Barclays, made a similar move on the same day and several other banks have recently decided to cut their rates in reaction to cheaper funding.
Northern Rock will offer two-year flexible fixed-rate mortgages at 3.75 per cent to those borrowing up to 70 per cent of a home?s value. It will also offer a tracker with a 2.20 per cent base rate and ? thanks to the rates being slashed ? arrangement fees have also been cut down to as little as ?400.
Previously only those who were borrowing 65 per cent of a home?s value were entitled to the best deals the state-owned bank would offer, which was 4.09 per cent in the case of the two-year fixed rate.
Woolwich cut rates by 0.4 per cent on its leading tracker mortgage to 2.79 per cent (base rate plus 2.29 per cent) for people borrowing up to 70 per cent of a home?s value. While their fees are higher than Northern Rock?s, they have compensated this by offering a fee-free option at 3.19 per cent (base rate plus 2.69 per cent).
Ray Boulger, senior technical manager at John Charcol, said: ?These are significant moves. Northern Rock has cut their best rates quite significantly. Banks are seeing their funding costs decreasing, which is resulting in better deals and could help the housing market.?
However, Northern Rock must be careful not violate the EU rules concerning state aid given to banks by being too competitive.
