Page last updated at 11:48 GMT, Friday, 12 September 2008 12:48 UK

Abbey to cut mortgage rates again

Abbey branch
Abbey is one of a number of lenders competing more vigorously

The Abbey bank has become the latest high-street lender to cut some of its mortgage rates.

It is now making fixed-rate deals cheaper for people who can put down a deposit of just 15%.

In the past week other lenders including the Nationwide, HSBC and the Co-op bank have also cut their rates.

The downward trend in fixed-rate mortgage costs is due to the falling cost to banks of borrowing wholesale funds on the financial markets.

"Fixed rate interest rates have reduced recently and as the market environment changes, we're able to pass these benefits to our customers," said Phil Cliff, director of mortgages at Abbey.

The latest move was welcomed by Aaron Strutt of mortgage brokers Chase De Vere.

"Abbey cut the majority of their mortgages over 75% loan-to-value in June," he said.

"The remaining deals were not a viable option for thousands of their borrowers with smaller deposits.

"It is good news that Abbey have started to offer better deals for those with 15% deposit," he added.

Competing for business

The changes mean that the interest charged on some of the Abbey's fixed- and variable-rate mortgages has come down by up to 0.6%.

This week has seen a continuation of the trend for lenders to be making frequent cuts in rates on their residential mortgages
Ray Boulger, John Charcol

Until now the lender had only two fixed rate deals on the market, each for five years, for those who could not put down at least 25% of the value of the property.

From Monday, it is introducing new deals for those with a 15% deposit and cutting the interest rates on existing offers.

Ray Boulger, of mortgage brokers John Charcol, said the mortgage market had improved considerably since the "depths of despair" in the first six months of the year.

"This week has seen a continuation of the trend which started about 10 weeks ago for lenders to be making frequent cuts in rates on their residential mortgages, especially fixed-rates, and actively competing for business rather than competing to avoid business."

"An increasing number of lenders have started offering cheaper rates for loans-to-value up to 60%, 65% or 70%, demonstrating that risk-based pricing is becoming increasingly important," he added.

He also pointed out that some building societies were now starting to compete for business again, after seeing their lending slump earlier in the summer.

Even the buy-to-let market was becoming more active with some lenders now offering cheaper deals to would-be landlords, according to Mr Boulger.

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