The Telegraph Reports

06 February 2015

A mortgage rate war among banks has reduced the cost of a typical home loan by £1,700 in just four weeks, figures show.

Dozens of new deals have been unveiled since the turn of the year, offering borrowers lower rates and cheaper fees.

The latest round of cuts, made on Friday by First Direct, allows borrowers to lock into a 2.89 per cent rate for a decade – a record low for such a long period.

The announcement follows similar moves this week by HSBC, Barclays and Norwich & Peterborough building society.

Calculations for The Telegraph showed families who remortgaged a £200,000 loan would be as much as £1,689 better off over the next half-decade compared to a month ago.

Costs are being driven down by fierce competition between lenders and indications that the Bank of England will keep interest rates low for longer.

Mortgage brokers are predicting even cheaper deals to come, with two-year rates tipped to fall below 1 per cent and five-year deals below 2 per cent “within weeks”.

Mark Harris, of broker SPF Private Clients, said: “Lenders are keen to advance more money this year and they’re cutting their prices to attract customers. Banks will hope to make money by selling customers other products such as current accounts and credit cards.”

Aaron Strutt, of Trinity Financial, another broker, said: “For fixed rates to go below 1 per cent would be extraordinary, but that now looks likely to happen very soon.”

The best new deals since January include a 1.19 per cent two-year fix from HSBC for someone with a 40 per cent deposit, down from 1.29 per cent before.

For someone with an 80 per cent deposit the best two-year rate has fallen from 1.98 per cent to 1.79 per cent, following a move by Marsden Building Society to undercut the Post Office.

The cheapest five-year rate is First Direct’s 2.28 per cent, which was one of a number of cuts made on Friday.