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Fixed mortgage fees at pre-crunch levels

Jude Buttle

Latest figures have shown that the cost of a two-year fixed-rate mortgage has returned to its pre-credit crunch level following the most prolonged period of cuts since the crisis began.

The average rate is now 6.39% for a two-year fixed rate mortgage - according to the financial data group Moneyfacts.co.uk - around the same level as before the credit crunch surfaced last summer, although the base rate set by the Bank of England was 0.75% higher back then.

Rates on the popular two-year deals peaked at 7.08% at the beginning of July this year, when the gap between the Bank of England base rate and the average two-year mortgage rate was the widest on record.

But since then competition has returned to the market and most of the top ten lenders have made rate cuts, with some also reducing their arrangement fees.

Britain's biggest mortgage lender Halifax has led the way, slashing its two-year fixed rate deals by an average of 1.28%, while it has also reduced arrangement fees by around £301.

Bradford & Bingley has made the next biggest reduction at an average of 0.76%, followed by Cheltenham & Gloucester - the lending part of Lloyds TSB - at 0.72%, although both of these groups' arrangement fees have increased, by £83 and £627 respectively.

Bucking the trend is nationalised bank Northern Rock, who left its two-year fixed-rate deals virtually unchanged, cutting them by an average of just 0.01%, while its average arrangement fee has risen to £500.

Michelle Slade, analyst at Moneyfacts.co.uk, said: "The cost to lenders in obtaining the funds for mortgages on the money markets has dropped significantly in the last few months and we are now seeing some relief for borrowers who are looking for a new deal. I doubt we will see rates being cut to levels similar to when base rate was last at 5%, but we should hopefully see further cuts from the big lenders in the coming months.

"Only time will tell if we have finally turned a corner, but this is the most prolonged period of cuts we have seen since the credit crunch began."