Cost of fixed-rate mortgages falls as housing market slows

Major lenders including the Halifax, Nationwide, Britannia and the Royal Bank of Scotland have moved to cut the cost of deals.

In one example, Nationwide's two-year fixed rate deal has dropped from 5.83 per cent to 5.78 per cent.

The cuts will be welcome news for homeowners coming to the end of cheaper fixed-rate deals and looking for a new arrangement on their loan.

Around 1.3million households are set to come off fixed-rate deals this year, according to the Council of Mortgage Lenders.

They have been warned to expect an extra 1.5 per cent on the rate for updated mortgage packages.

Despite five base rate rises in the last year to 5.75 per cent, fixed-rate mortgages remain the most popular loan deal.

In June, an estimated 78 per cent of new mortgage holders opted for this type of repayment.

But some brokers were still recommending that buyers switched to trackers, which are likely to work out cheaper if interest rates do continue to increase.

However, weaker inflation figures have now overturned predictions that base rates could rise yet again to six per cent, fuelling predictions that they have peaked.

There have been warnings that cuts in fixed-rate mortgages will not benefit everyone, with those with poorer credit ratings at risk of being priced out of the market.

Malcolm Barr, UK economist at J P Morgan Chase Bank, advised caution. "It is too early to say with any degree of confidence whether interest rates have peaked," he said.

"We are approaching levels at which it may be possible to think interest rates may stabilise or at least rise more slowly but the bias is that risks are still to the upside.

"This level of interest rates does seem to be restraining the economy and there are signs that consumer demand is slowing.

"The signs are that with markets a bit bouncy the Bank of England is being a bit more patient."

Meanwhile, there has been further evidence that house price inflation ground to a halt this month.

Property website Hometrack said the market had seen the worst monthly performance since November 2005 with London the only region to record a rise in home values.

However, the 0.1 per cent increase was tiny compared to the 1.8 per cent high recorded in the capital in March.

Three regions saw average house prices fall during August: Yorkshire and Humberside, the North and the South West.

All the other regions were stagnant, meaning the typical price of a home in England and Wales has remained at £176,300.

• A bank has been stopped from levying charges on a customer for an unauthorised overdraft.

A judge ruled that Barclays should not impose further penalties on Nadine Fry until after a ruling to decide if such charges are legal.

The decision came at Luton County Court last week as Miss Fry tried to reclaim money previously taken from her account in penalty fees.

Her case will now wait until a test case due in the High Court early next year.

This has been brought by the Office of Fair Trading over the handling of complaints at bank charges. Thousands of account holders have reclaimed cash taken in fees that many say are unfair.