Why are mortgage lenders cutting rates?

Question

I've noticed that a number of mortgage lenders have cut their rates a number of times this week - Nationwide, Halifax, Bradford & Bingley and RBS.

What's the reason behind this and will it help in the current crisis?

Answer 1

Mortgage companies obtain money for mortgage lending on the money markets. If the cost they borrow money at goes up, they in turn increase mortgage rates. Subsequently as the cost goes down mortgage rates go down. The cost of mortgage borrowing reached a peak in early July and since then rates have slowly started to decline.

Although this is welcome news in the current crisis, until we see a more prolonged period of rates coming down, it is too early to say we have reached the end of the credit crunch.

Plus mortgage rates are only one aspect of the current crisis with the economic climate. Inflation is predicted to increase further and there appears no real end to increasing food and fuel cost. It is likely things will worsen further before they get better.

Answer 2

Mortgage rates are typically tied to rate at which the banks themselves can borrow money, so as the bank's interest rates vary, so do the rates that they charge for mortgages.

Answer 3

to stimulate the market, you will notice that although the rates have down down slightly, the arrangement fees are still a big RIP OFF.

also people need to put down more as a deposit before they can even get these rates.. its all BULL!

Answer 4

Rates go up.  Rates go down.  You can make yourself crazy trying to figure them out.  The rates went up 2% in 4 days in 1987.   Not one "expert" predicted it.  I know because i subscribe to all the mortgage industry newsletters.