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Bank slashes mortgage rates

RBS bucks trend, cutting fixed and tracker rates

A for sale sign

Royal Bank of Scotland (RBS) is today slashing its fixed-rate and tracker mortgages by up to 0.3% in a bid to boost its market share.

The move will see all fixed-rate and tracker mortgages taken out directly with RBS and NatWest reduced by between 0.1% and 0.3%.

Similar changes to home loans taken out through brokers will be announced shortly.

Bucking the trend

RBS said it had made the changes, which buck the current trend for lenders to raise their rates, in a bid to increase its market share and maintain its currently higher than normal lending volumes for the rest of the year.

The group was the UK’s sixth largest mortgage lender at the end of 2007, writing 6% of all home loans.

Paul Geddes, chief executive of consumer banking, said: ‘Whilst 2008 has seen a shrinking mortgage market, we have actually increased the amount we have lent by 18% and plan to continue this trend for the rest of the year.’

Fixed rate

The changes will see the cost of a five-year fixed rate mortgage for someone with a 25% deposit who is buying a new home fall by 0.3% to 5.89%, saving £335 a year for a borrower with a £150,000 mortgage.

But rates on a similar mortgage for someone with just a 10% deposit will only fall by 0.15% to 6.14%.

David Hollingworth, of mortgage broker London and Country, said he was surprised by the move.

He said: ‘Any lender making a cut in rates is in the minority at the moment. For their size RBS have never really punched at their weight in the mortgage market.’

Rates increasing

But he added that he did not think the move signalled an end to the current trend for lenders to increase their rates.

RBS also today launched a new account to help first-time buyers save for a deposit, offering a tax-free cashback bonus of up to £5,000 when people take out a mortgage with the RBS Group.

The First Home Saver Account can be opened with just £100 and people then have to pay in a minimum of £50 a month for at least six months.

Interest on the account ranges from 1.9% to 3.75% depending on the amount invested, and people will have to save £50,000 to qualify for the full £5,000 bonus when they draw down their mortgage.

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