Mortgage war launched by foreign banks

Published 20th Jan 2010

Big foreign banks have sparked a mortgage price war which is squeezing interest rates and forcing home-grown lenders to revise their best deals at an ever-increasing rate.

Spanish-owned Santander, Dutch ING Direct and new face Bank of China have all slashed leading deals in recent days - forcing their competitors to follow.

HSBC revealed cuts on Monday, and building societies Coventry and Principality have responded. Nationwide and the tiny Cumberland building societies are among the others to have announced home loan cuts in recent days.

Research shows that home-owners must act swiftly if they want to snare top deals. In September 2009 leading deals were on the market for an average of 24 days, but now they vanish after just 18 days, according to financial data analyst Moneyfacts.

Among the building societies which have been offering more competitive deals are Dudley, Principality, Coventry, Chorley & District, Chelsea and Newcastle. But they frequently have as little as £5 million available to lend - which covers as few as 50 mortgages.

Bank of China, the world's fifth biggest bank, announced it would begin offering mortgages in the UK last year. On Wednesday it launched a lifetime tracker at 2.3 percentage points above base rate (giving a starting rate of 2.8 pc) for those with at least a 25 pc deposit.

On a typical £150,000, 25-year loan, monthly repayments would be £696. The fee depends on how much you want to borrow, but for this loan it would be £995.

ING Direct - the world's eighth biggest bank - has not been a major player in the UK market for a year. But its recent offerings have shot it to the top of the Best Buy tables.

Its best deal is a two-year fix at 3.68 pc with a £595 fee for those with a 40 pc deposit. Repayments on a £150,000, 25-year loan would be £766 and total interest payable of £18,979.

Europe's biggest bank, Santander - the new name for Abbey - countered by chopping its two-year tracker by half a percentage point to 3.49 pc above base (3.99 pc) for homeowners with at least a 20 pc deposit. Repayments would start at £791 and the fee is £995.

On Monday, HSBC revealed a lifetime tracker at 1.99 pc points above base (2.49 pc), with a £199 fee, for borrowers with a slightly larger 40 pc deposit. Repayments would be £679.

And Coventry slashed its two-year fix to 5.15 pc for remortgagors with a 15 pc deposit. Repayments would be £890 and the fee is a low £199. Total interest payable over two years would be £21,559.

Source: ' Daily Mail '

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