Relief for homeowners as three more lenders cut mortgage rates

Nationwide Building Society, the Co-operative Bank and Yorkshire Building Society are all dropping their rates following a fall in wholesale funding costs.

The biggest reduction in the Nationwide range is to its five-year fixed-rate mortgage for people buying a new home, who pay a higher arrangement fee.

Nationwide is one of three lenders which have announced cuts to its mortgage rates, bringing some relief to borrowers

The bank is dropping rates on this range by 0.3 per cent, although it is increasing the fee from £1,499 to £1,999 which also applied to any of its higher fee deals.

Two-year fixed-rate loans across the group's range are being cut by 0.1 per cent from Friday, while two-year trackers for people remortgaging are being cut by 0.05 per cent.

The group is also launching a new range of two-year fixed-rate mortgages with a £999 arrangement fee, starting at 5.58 per cent  for people with a 40 per cent deposit.

Nationwide's director of mortgages Matthew Carter said the group would continue to look for opportunities to make further reductions to its range where possible.

Yorkshire Building Society is cutting its Fresh Start mortgage, aimed at people who are divorced or separated, by 0.5 per cent, while it is also reducing its two, three and five-year fixed-rate loans by 0.15 per cent.

This will give borrowers a new rate of 5.59 per cent for those with a 25 per cent deposit.

The group has also halved the arrangement fees on its mainstream products to £495 from £995.

The Co-operative Bank announced it is cutting the cost of its three and five-year fixed-rate mortgages for people borrowing 75 per cent of their home's value by 0.3 per cent and 0.7 per cent respectively from September 15.

Mortgage rates have been falling steadily in recent weeks as lenders pass on reductions in swap rates, upon which fixed-rate deals are based.

Figures released by the Bank of England yesterday showed that the average cost of two and five-year fixed-rate mortgages for borrowers with at least a 25 per cent deposit fell for the second month in a row during August, dropping by 0.27 per cent.

But the drop was less obvious for people with smaller deposits, with a five-year fixed-rate mortgage for someone borrowing 95 per cent of their home's value decreasing by just 0.05 per cent to an average 7.09 per cent.

Ten of the UK's 12 biggest lenders have cut their two or three-year fixed-rate deals at least once during the past two weeks, as lenders once again fight for business.

A number of lenders have also launched two-year fixed-rate mortgages with rates of less than 5 per cent, although many of these come with hefty arrangement fees.

The average cost of a two-year fixed-rate mortgage recently returned to its pre-credit crunch level, although the Bank of England base rate is now 0.75 per cent lower than it was a year ago.