Mortgage rates are now at 2007 levels
According to research done by price comparison site Moneyfacts, mortgage rates are at the same levels they were in August 2007 when the credit crunch first started to hit.
An average rate on a two-year fixed deal is now 6.59%, almost the same as 6.56% in August 2007. This rate is down from the same average early July of 7.08%.
However, Moneyfacts did say the costs associated with mortgages remain high.
The rates that are better are only available to those with large deposits and lenders are also charging higher fees.
The average mortgage arrangement fee was now £964 compared with £803 in August 2007, according to the study done by Moneyfacts.
Also there is less competition in the market, with only 3,748 products on sale as opposed to 13,027 in August 2007.
Money facts say buyers are also being asked to put down larger deposits, the average being 20% now.
A spokesman for Moneyfacts said “The pricing is getting back to where we were a year ago, but the appetite for lending is diminished.”
Even though the rates are at a similar level, banks are potentially making more profits than a year ago.
Official interest rates, which are what fixed mortgage rates are indirectly based on, are now 5% compared to 5.75% in August 2007. This means lenders are getting better returns on the products they offer.
Last year 33 lenders were offering 100% mortgages compared with just 2 in August this year.
Lenders such as Abbey, Nationwide and HBOS have been cutting their rates.
Lending to homeowners has dropped dramatically in 2008, because the credit crunch has left most banks with no funds available.
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