Rates on popular mortgages have fallen by a third since the summer, knocking circa £125 off the monthly interest of a £150,000 mortgage.
Although some of these deals require as much as a 40 per cent deposit, and primarily target the remortgage market, this might filter through to the first-time buyer market too.
Experts said many other lenders could follow suit and this would inject some much needed life back into the declining property market.
The price war has been sparked by a Government scheme – Funding for Lending (FLS) which allows lenders to borrow at rock-bottom rates from the Bank of England. Before the initiative, some of the best rates for a two-year fixed rate mortgage for borrowers with equity was circa 2.99 per cent.
The best rate now is just 1.99 per cent which means that interest rates have been cut by a third in just a matter of months.
The number of mortgage deals on the market has increased by 17 per cent since August and the number of approvals for remortgaging (29,358) also revealed an upward trend, increasing marginally in October and above the previous six month average of 27,602.
By contrast data shows that 66% of first-time buyers who bought a property in recent years did so with the help of the ‘Bank of Mum and Dad’, as high deposits demands from lenders and spiralling property prices make it increasingly difficult for the younger generation to secure their first home.
Mark Harris, chief executive of mortgage broker SPF Private Clients, argued that there is hope for first-time buyers, outlining that as the government’s Funding for Lending Scheme gains momentum banks will continue to step up the competition by attracting borrowers with lower deposits.
He said: “As lenders saturate the low loan-to-value (LTV) market with a plethora of rock-bottom rates, they will be forced to turn to the higher LTV bracket if they are going to do any significant levels of business, which will mean cheaper rates and more choice for first time buyers in particular.”