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Abbey cuts mortgage rates

It cuts two-, three- and five-year fixed rates
A for sale sign

Abbey has become the latest lender to slash its mortgage rates as competition continued to return to the market.

The group is cutting rates on its two-, three- and five-year fixed-rate loans by up to 0.3%.

It is also reducing the cost of mortgages in its large loans range, aimed at people borrowing between £550,000 and £5 million, by up to 0.35%.

Fixed rates

The changes, which take effect from today, will leave a two-year fixed-rate mortgage for someone with a 25% deposit costing 5.79%.

The move comes the day after Lloyds TSB announced it was cutting its mortgage rates for the fifth time in a month, reducing its two, three, five and seven-year fixed-rate deals by up to 0.11% for people with at least a 25% deposit.

The latest round of cuts are a further sign that competition is returning to the mortgage market following the problems caused by the credit crunch.

Pre-crunch levels

Financial information group Moneyfacts.co.uk said earlier this week that the cost of a two-year fixed-rate mortgage has returned to its pre-credit crunch level as a result of the most prolonged period of cuts since the crisis began.

The average rate for a two-year fixed rate loan is now 6.39%, around the same level as before the credit crunch first surfaced in July last year, although the Bank of England base rate was 0.75% higher then.

Rates on the popular two-year deals peaked at 7.08% at the beginning of July but have come down steadily since then, following cuts in wholesale funding costs.

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