The most competitive two-year fixed rate deals for borrowers with a 10 per cent deposit are currently 6.44 per cent compared with 5.69 per cent in November 2007 despite the Bank of England base rate nearly halving from 5.75 per cent last year to three per cent now.
And it’s a similar picture for three-year and five-year deals – the best currently are 6.44 per cent and 6.14 per cent respectively compared with 5.69 per cent and 5.39 per cent in November 2007.
But analysis of key indicators show lenders can afford to cut costs substantially if they choose, mform.co.uk says. The key interbank lending rate, 3 month LIBOR, is currently 4.496 per cent compared with 6.6 per cent this time last year.
That adds up to substantial profits for lenders as during the same period they have cut the top rates for cash ISAs from 6.26 per cent to 6.01 per cent now.
Francis Ghiloni, Marketing and Business Development Director of mform.co.uk, said: “It defies logic that the best fixed rate deals for first-time buyers are currently more expensive than a year ago when base rates have been cut so dramatically.
“However the events of the past few months have shown that logic does not currently play much of a role in the UK mortgage market. If you are feeling generous you might argue that lenders are facing a tough set of challenges of balancing profitability against responsible lending.
“However if you are feeling less generous you could easily make a case that profitability is the sole determinant for lenders in the current market. On the face of it they are enjoying very comfortable profit margins and could make substantial cuts.”
The only glimmer of good news for first-time buyers and borrowers with smaller deposits is that fees have fallen – fees on the best deals were around £999 last year and are currently about £599.
Analysis of applications through mform.co.uk in September to November 2007 shows the average rate paid was 5.82 per cent compared with 5.87 per cent during the past two months.
Average income multiples have dropped from 2.81 to 2.69 now while the average amount borrowed is virtually unchanged at £143,841 now compared with £144,809 a year ago.
